By William Edwards, Ryan Beene and Shawn Donnan

China and the U.S. signaled they’re getting closer to agreeing on the first phase of a deal aimed at reducing tensions in a trade war that’s slowed the global economy.

The top negotiators from the world’s two largest economies -- China’s Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer -- talked by phone Friday and both sides released statements describing the call as "constructive."

The Chinese Ministry of Commerce said they achieved a “consensus in principle,” while the U.S. offered a slightly more cautious assessment of the negotiations -- citing progress and saying working-level talks would continue.

“They made progress in a variety of areas and are in the process of resolving outstanding issues,” the USTR said in a statement.

A spokesman for the USTR declined to confirm China’s characterization that a consensus had been achieved in core areas, but earlier in the day White House economic adviser Larry Kudlow said that negotiators were nearing an agreement on a number of fronts.

Stocks rose to fresh records Friday amid signs of a breakthrough and after a report showing stronger-than-expected job growth in the U.S.

If phase one is completed, it could give President Donald Trump a lift heading into his 2020 re-election bid. The U.S. economy has shown signs of slowing as businesses hold back investments amid uncertainty over the impact of tariffs on hundreds of billions of Chinese goods.

But whether the talks go beyond this initial phase, which Trump said was 60% of a broader deal he’s seeking, remains a big unknown. Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides close in on the phase one agreement, Bloomberg reported this week.

Adding to the complexity of the relationship between the two countries, the World Trade Organization earlier Friday awarded China permission to impose $3.6 billion in sanctions against the U.S. The case predates the tariff war between the two nations but may add a layer of tension to ongoing talks.

Tariff Question

Kudlow told reporters earlier Friday that negotiators are close to finishing details of the pact on China’s increased purchases of U.S. agriculture products, currency stability and opening of financial services markets to American firms. They’ve also made “excellent progress” on the issue of intellectual property theft, he said. Disputes around so-called forced tech transfer will likely not be resolved until a possible phase two of the deal.

Kudlow also left open the possibility of additional tariffs on Chinese goods as talks continue. China wants Trump to cancel a new wave of import taxes due to take effect Dec. 15 on American consumer favorites such as smartphones and toys as part of the phase one deal.

“They’re still on the table until this phase one deal is completed, or worst case not completed,” Kudlow said in an interview on Bloomberg Television. “The president has hinted, depending on the process of phase one, he may be willing, I say may be willing, to take a look at those tariffs.”

Both countries are seeking an alternate location to sign a deal, if they reach one, after Chile canceled a summit this month where President Donald Trump and China’s leader Xi Jinping were aiming to meet.

--With assistance from Jenny Leonard and Joshua Gallu.

To contact the reporters on this story:
William Edwards in Washington at [email protected];
Ryan Beene in Washington at [email protected];
Shawn Donnan in Washington at [email protected]

To contact the editors responsible for this story:
Margaret Collins at [email protected]
Brendan Murray

© 2019 Bloomberg L.P.