Those concessions have been on the table throughout the trade war so the apparent willingness of the US negotiators to contemplate a deal that stops the escalation of the conflict would be a major about-face by the US administration.
Any “phase one” deal would be signed by Donald Trump and China’s Xi Jinping, probably in the US later this month.
The September tariffs for the first time directly impacted consumer goods and the December round would have had an even bigger impact on US households.
The trade war has caused the US manufacturing sector to shrink and really hurt the farm sector.
With emerging evidence the tariffs are starting to erode consumer confidence and spending, and with the drawn-out US presidential electoral cycle starting to warm up, the administration appears to have realised, belatedly, that trade wars are neither good nor easy to win.
Given the election timetable and the distraction of the impeachment proceedings against Trump, the ”phase one” deal may never be followed up with negotiations that address some of the more fundamental issues the US, and others, have with the way China manages its economy and pursues its economic and geopolitical goals.
China has definitely been damaged more by the current conflict than the US – its GDP growth rate has slowed to its lowest rate in nearly 30 years – but the US is also suffering self-inflicted harm.
A United Nations analysis issued on Tuesday said that data for the first half of this year showed most of the cost of the tariffs had been passed on to US consumers and companies.
While the dispute had cost China $US35 billion of exports in the first six months of the year, rather than that activity being repatriated to the US about $US21 billion of those exports had been picked up by third countries, with Taiwan, Mexico, Vietnam and the European Union the major beneficiaries, the UN paper said.
The rest would either have been lost in the slowing of the US and global growth rates or some repatriation of activity to higher-cost US manufacturers, although the latter doesn’t show up meaningfully in US manufacturing data.
Other international economic agencies have blamed the trade war for slumping global growth. Where Donald Trump saw trade wars as a zero-sum game – the US would win if China lost – it has, in reality, turned out to be a lose-lose-lose game with the fallout spreading beyond the principals.
Trump characterised US trade deficits as evidence that its trading partners were unfairly taking advantage of America, rather than being due to the relative health of the US economy, a relatively weak US savings rate and the structural deficit the US has to run if the dollar is to remain the world’s reserve currency and the dominant medium of exchange in trade.
US trade data released on Tuesday confirmed that if the success of the administration’s policies is measured by the size of its trade deficits, its policy has been a failure.
The US trade deficit for the nine months to the end of September grew 5.4 per cent to $US481.3 billion. Exports were down $US7 billion and imports up $US17.8 billion.
The deficit with China has shrunk, with imports from China down about 13.5 per cent compared to the same nine months last year, while US exports to China were 14.6 per cent lower.
In the month of September the overall trade balance did shrink slightly, although both exports and imports fell.
That would be in keeping with a US economy whose growth rate is slowing although it might also have been influenced by some pre-emptive activity by US importers ahead of the September 1 tariffs.
US Secretary of Commerce Wilbur Ross hailed the one-month data as evidence that Trump’s trade policies are getting results.
That is, however, at odds with both the longer-run numbers and the preparedness of the administration to contemplate measures to reduce the trade hostilities and wind back the tariffs that would have been inconceivable earlier this year.
Stephen is one of Australia’s most respected business journalists. He was most recently co-founder and associate editor of the Business Spectator website and an associate editor and senior columnist at The Australian.