Behind-the-scenes negotiations to avert a trade war in the making
SAN FRANCISCO — China is considering buying more semiconductors from U.S. firms as part of behind-the-scenes negotiations to reduce the U.S. trade deficit with China and avert a trade war, according to reports.
The Wall Street Journal reported on Monday that the Trump administration wants to increase sales of U.S. cars and semiconductors in China as part of a plan to cut the bilateral trade deficit with China — estimated to be about $375 billion — by $100 billion. The Wall Street Journal report cites anonymous sources said to have knowledge of the negotiations between the two nations.
According to a Financial Times report, also citing anonymous sources, China has expressed willingness to divert some of its chip purchases away from Japanese and South Korean companies in favor of U.S. semiconductor firms. China imported $2.6 billion worth of chips from the U.S. last year, according to a separate report by the Reuters news service.
Many in both the U.S. and China are hopeful that the two countries can reach an agreement to avert a trade war that is likely to be costly for both sides. Last week, Trump unveiled plans to propose tariffs on up to $60 billion in Chinese products as part of a set of actions outlined in response to what it calls China's unfair trade policies. China responded almost immediately, threatening to impose tariffs on about $3 billion worth of U.S. goods.
The tariffs proposed by Trump wouldn't go into effect for at least 30 days, a waiting period seen by many observers as an indication that the proposal is largely a negotiating tactic designed to force China to the bargaining table to reduce the trade deficit between the two countries. The U.S. Trade Representative is scheduled to release for public comment a list of Chinese products that the U.S. would levy tariffs on in two weeks.
The U.S. semiconductor industry has reacted cautiously to the proposed tariffs so far. While the Semiconductor Industry Association (SIA) — a trade group that represents U.S. chip companies — welcomed the support for the protection of intellectual property that is considered one of the sticking points to U.S.-China trade, American chip makers also appear uneasy about a trade war with the world's second largest economy that could ultimately harm their businesses.
Any deal that includes a pledge by China to buy more U.S. semiconductors is likely to be applauded by the SIA and its member companies.
— Dylan McGrath is the editor-in-chief of EE Times.