China says holding ‘in-depth’ talks with US on interim trade deal

China and the United States are holding “in-depth” discussions on a first phase trade agreement, and cancelling tariffs is an important condition to reaching a deal, the Chinese commerce ministry said on Thursday.

The degree of tariff cancellation should fully reflect the importance of a ‘phase one’ agreement, ministry spokesman Gao Feng told a regular briefing. “China has emphasized many times that the trade war began with additional tariffs and should end with the cancellation of additional tariffs,” said Gao.

On Tuesday, US President Donald Trump said a trade deal with China was “close” but offered no details and warned that he would raise tariffs “substantially” on Chinese goods without such a deal.

Trump’s threat was a reference to previously announced tariffs of 15 percent on about $156 billion of Chinese consumer goods set to take effect on Dec. 15, according to trade experts and a source close to the White House. Those tariffs would hit video game consoles, computer monitors, Christmas decorations and items given as gifts during the approaching festive season.

Last week, White House advisers said the Dec. 15 tariffs would probably be averted if a ‘phase one’ trade deal was reached.

“If both sides reach a ‘phase one’ deal, the degree of tariff cancellation should fully reflect the importance of the ‘phase one’ deal; and its importance should be appraised by both sides together. Both sides are conducting in-depth discussions on this now,” said Gao.

Highlighting the volatile state of play in the 16-month long trade war, officials of both sides had said last week they had a deal to roll back tariffs, only to have Trump deny any deal had been agreed.

Trump has imposed tariffs on billions of dollars of Chinese goods to force major changes in China’s trade and industrial policies.

The US administration is demanding that China end the theft and forced transfer of American intellectual property and curb subsidies to state-owned enterprises, while granting US companies more access to China’s markets.