China retreated on almost every aspect of the US trade deal

Beijing's diplomatic cable arrived in Washington late Friday night, with systematic changes to a nearly 150-page draft trade agreement that would break months of negotiations between the world's two largest economies, according to three US government sources and three private sector sources informed about the talks.

The document contained reversals from China that undermined key US demands, sources told Reuters.

In each of the seven chapters of the draft trade agreement, China had abolished its commitment to amend the laws to resolve the main complaints that led the United States to trigger a trade war: the theft of intellectual property and trade secrets from the United States. United States; forced technology transfers; competition policy; access to financial services; and manipulation of the currency.

US President Donald Trump reacted in a tweet Sunday promising to raise tariffs on Chinese goods to a value of $ 200 billion, from 10 to 25% Friday, which should be done in the middle of April. a planned visit by Chinese Vice Premier Liu He to Washington. talks.

The removal of the project's legally binding terms has directly touched on the highest priority of US Trade Representative Robert Lighthizer – who believes that changes to Chinese law are essential for verifying compliance after years of what US officials have said. called empty reform promises.

Lighthizer has been very insistent that a repressive regime is more like the one used for punitive economic sanctions – such as those imposed on North Korea or Iran – on a typical trade deal.

"This undermines the basic architecture of the deal," said a Washington-based source and informed of the talks.

"NEGOTIATING PROCESS"

White House spokespeople, the US Trade Representative and the US Treasury Department did not immediately respond to requests for comment.

Chinese Foreign Ministry spokesman Geng Shuang said at a press briefing on Wednesday that the settlement of disputes over trade was a "negotiating process" and that China "does not want to see it. did not avoid problems.

Geng referred specific questions on trade negotiations to the Ministry of Commerce, which did not immediately respond to questions sent by fax from Reuters.

Lighthizer and US Treasury Secretary Steven Mnuchin were surprised by the magnitude of the changes to the project. The two government officials told reporters Monday that China's backtracking had prompted Trump's tariff ruling, but did not provide details on the depth and breadth of the revisions.

Last week, Liu told Lighthizer and Mnuchin that they had to trust China to fulfill its commitments through administrative and regulatory changes, said two sources. Mnuchin and Lighthizer both felt that it was unacceptable, given that China has still not kept its promises of reform.

A private sector source informed of the talks said the last round of negotiations had gone very badly because "China had become greedy".

"China has given up a dozen or more things … The discussions have been so bad that the real surprise is that it was not until Trump until Sunday to explode," said the source. .

"After 20 years with the United States, China still seems to miscalculate this administration."

MORE DISCUSSIONS THIS WEEK

The rapid deterioration in trading has shaken global stock markets, bonds and commodities this week. Until Sunday, the markets were waiting for officials from both countries to be in the process of concluding an agreement.

Investors and badysts wondered whether Trump's tweet was a negotiating ploy for more concessions from China. The sources told Reuters that the magnitude of the setbacks in the revised text was serious and that Trump's response was not just a negotiating strategy.

Chinese negotiators said they could not touch the laws, said one of the government sources, calling the changes "major."

Changing any law in China requires a unique set of processes that can not be traveled quickly, said a Chinese official familiar with the discussions. The official challenged the claim that China was overshadowing its promises, adding that the US requirements were becoming "harder" and that the path to an agreement was becoming "closer" as negotiations continued. .

Liu is due to arrive in Washington on Thursday for two days of talks that last week were widely considered essential – a last possible round before a historic trade deal. Today, US officials have little hope that Liu comes with any offer likely to restart negotiations, said two sources.

To avoid escalation, some sources said Liu should abandon China's proposed changes and agree to make new laws. China should also move more towards the US position on other issues, such as requests for subsidy limits for Chinese industry and a simplified approval process for genetically modified US crops.

The administration announced that the latest tariff escalation would come into effect at 12:01 am Friday (0:01 GMT), hiking tours on Chinese products such as modems and Internet routers, circuit boards, vacuum cleaners and furniture.

The Chinese reversal could give the Chinese hawks to the Trump administration, including Lighthizer, an opportunity to take a tougher stance.

Mnuchin – who was more open to an agreement with better market access, and sometimes in conflict with Lighthizer – appeared in tune with Lighthizer in describing changes to reporters on Monday, while leaving open the possibility that new rates could be avoided with treat.

Trump's tweets left no room for maneuver, and Lighthizer made it clear that despite ongoing negotiations, "come Friday, rates will be in place."