White House economic adviser Larry Kudlow said the U.S. and China are on the cusp of an “historic” agreement.
Kudlow said the deal would commit Beijing to cut subsidies for state-owned companies and disclose when its central bank intervenes in currency markets.
"Last week was fantastic," the veteran financial guru and former Ronald Reagan adviser told CNBC.
"We're making great headway on nontariff barriers and tariffs regarding various commodities such as soybeans and energy and beef. We have mechanisms with regard to enforcement, which is — I think — unparalleled," said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
"The progress has been terrific," Kudlow added. But "we have to hear from the Chinese side. We have to hear from President Xi Jinping, of course. I think we're headed for a remarkable, historic deal," said Kudlow, who served as the Trump campaign's senior economic adviser.
The Chinese have pledged to “significantly” reduce subsidies to state-owned firms as part of a potential deal, as well as to disclose when the nation’s central bank buys and sells foreign currency, Kudlow said. The Asian nation has also pledged to “de-emphasize” its plans to dominate in emerging technologies, outlined in its Made-in-China 2025 plan, he added.
Kudlow cautioned that the U.S.-China accord still needs to be approved at the highest levels of the Chinese government, Bloomberg explained.
It’s likely President Donald Trump will meet Xi next month at the U.S. president’s resort in Mar-a-Lago, Florida, Kudlow said.
Kudlow’s bullish comments come only a day after Trump’s top trade negotiator struck a more cautious tone, warning U.S. lawmakers that more work needs to be done and declaring that the administration won’t accept a deal that doesn’t include significant “structural” changes to China’s state-driven economy, as well as a strong enforcement mechanism.
Treasury Secretary Steven Mnuchin in a CNBC interview that followed Kudlow’s remarks echoed the more cautious tone from Lighthizer, saying “the deal is not done yet but we’ve made a lot progress.” He rejected any suggestion that the administration was divided in its approach to China, saying U.S. officials taking a united front in the negotiations.
The U.S. Trade Representative’s office said Thursday it will publish a notice in the Federal Register indefinitely delaying the increase of tariffs on Chinese imports. Trump had previously planned to raise tariffs on March 1, but dropped the threat amid progress at the negotiating table after the most recent round of talks that ended on Sunday in Washington.
For his part, Lighthizer told lawmakers on Wednesday that the United States will need to maintain the threat of tariffs on Chinese goods for years even if Washington and Beijing strike a deal to end a costly tariff war.
Lighthizer cautioned that much work was still needed to nail down a U.S.-China trade agreement, including working out how it will be enforced, Reuters reported.
“If we can complete this effort - and again I say if ... we might be able to have an agreement that helps us turn the corner in our economic relationship with China,” Lighthizer said in testimony to the U.S. House Ways and Means Committee.
The two countries have imposed tit-for-tat tariffs on hundreds of billions of dollars worth of each others’ goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.
Lighthizer said USTR was taking legal steps to implement Trump’s decision on Sunday to delay a tariff increase on more than $200 billion worth of Chinese goods that had been scheduled for Friday.
But USTR later clarified in a statement that it was not abandoning the threat of increasing the tariffs to 25 percent from 10 percent. It said a Federal Register notice would be published this week that would suspend the increase “until further notice.”
Kudlow praised Lighthizer.
"Lighthizer has worked miracles on this Chinese deal," Kudlow said. "We've never come this far on China trade."
Material from Bloomberg and Reuters has been used in this report.
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