China Pledges to Implement U.S. Trade Deal Amid Rising Tensions

China reiterated a pledge to implement the first phase of its trade deal with the U.S. despite setbacks from the coronavirus outbreak, and as tensions escalate between the world’s two biggest economies.

“We will work with the United States to implement the phase one China-U.S. economic and trade agreement,” Premier Li Keqiang told an annual gathering of lawmakers in Beijing on Friday. “China will continue to boost economic and trade cooperation with other countries to deliver mutual benefits.”

Over the past two years, the Trump administration had imposed punitive duties on roughly $360 billion in Chinese goods, and China retaliated by raising levies on more than half of America’s exports. The two sides signed a phase-one trade pact on Jan. 15 and rolled back some of the tariffs, but the agreement has come under treat as the two nations escalate disputes on many fronts.

The centerpiece of the January agreement was China’s promises to buy more U.S. goods and services, but even before the coronavirus hit analysts were questioning whether those targets were realistic. Now, with both Chinese demand and U.S. manufacturing and transport capacity down due to the virus—and prices falling for energy and other goods—those promises look even further out of reach.

Chinese Vice Premier Liu He, and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin earlier this month pledged to create favorable conditions for implementing the trade deal and cooperating on the economy and public health. But President Donald Trump said later in an interview that he is having “a very hard time with China” and last week said the U.S. would “save $500 billion” if it cut off ties with China.

China on Friday also abandoned its usual practice of setting a numerical target for economic growth this year due to the turmoil caused by the virus, breaking with decades of Communist Party planning habits in an admission of the deep rupture that the disease has caused.

Beijing is using the legislative session to pass a bill establishing “an enforcement mechanism for ensuring national security” for Hong Kong, setting up a potential showdown with Trump, who has come under pressure in Washington to reconsider the city’s special trading status. Secretary of State Michael Pompeo has delayed an annual report on whether the city still enjoys a “high degree of autonomy” from Beijing, telling reporters Wednesday that he was “closely watching what’s going on there.”