WASHINGTON—Chinese and U.S. negotiators are starting to flesh out a deal that could defuse trade tensions by boosting U.S. exports and loosening regulations that hobble U.S. firms operating in China, say people tracking the talks.

On Saturday, President Trump tweeted that he and Chinese President Xi Jinping had recently talked by phone and made “big progress” in talks, due to conclude on March 1. “Deal is moving along very well,” Mr. Trump tweeted. “If made, it will be very comprehensive, covering all subjects, areas and points of dispute.”

But people familiar with the state of negotiations said the president may be overstating how close the two sides are to an agreement. They note Mr. Trump has looked to calm markets, which have gyrated in recent days, in part, because of concern that the trade fight between the U.S. and China could spin out of control.

The White House declined to comment. A Chinese embassy spokesman didn’t immediately respond to requests for comment.

If no deal is reached, U.S. tariffs on $200 billion of Chinese goods are due to increase to 25% from 10% on March 2, potentially having a big impact on electronics, furniture, machinery and other U.S. industries that rely on Chinese imports. It could also deepen a slowdown in China’s economy, which would have broad consequences for global growth.


A team of U.S. trade officials, including Deputy Trade Representative Jeffrey Gerrish and Treasury Undersecretary David Malpass is expected in Beijing the week of Jan. 7 for several days of talks. If those negotiations make progress, Chinese trade officials, led by Vice Premier Liu He, will follow up with talks in Washington the following week, or soon after that with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin.

The trade representative’s office is now leading trade talks, though Treasury is also playing a significant role. For instance, Mr. Mnuchin lobbied successfully before Christmas to keep Chinese firms from being hit with sanctions for cyber espionage on the same day that the Justice Department announced indictments of two Chinese citizens allegedly tied to a state-sponsored campaign to steal sensitive information from U.S. businesses.

Treasury has wanted to keep the espionage issue separate from trade talks. But others in the government continue to press for Treasury sanctions, both to punish Beijing and to make clear that the U.S. will enforce agreements.

Since a Dec. 1 dinner meeting in Buenos Aires between Messrs. Trump and Xi, Beijing has rolled out a number of trade initiatives. They include a temporary suspension in tariffs on U.S.-made autos, purchases of U.S. soybeans despite Chinese tariffs on U.S. agriculture, and pledges to revamp industrial policies in China that disadvantage foreign firms.

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The latter proposals include cracking down on Chinese officials who pressure U.S. firms to transfer technology to Chinese partners—the heart of the Trump administration complaints against China. Beijing is also expected to propose giving foreign firms greater access to financial services and other sought-after sectors.


But China has made pledges of this sort in the past. U.S. negotiators now are pressing their Chinese counterparts to spell out, in great detail, the kinds of changes they would make—and to assure that Beijing doesn’t use other means to restrict foreign firms. Over the past year, China has resisted giving such detailed information.

For instance, if Chinese regulations are revised to boost foreign participation in financial markets, the U.S. wants to be assured that Beijing won’t use government authority over licensing, environment, land use and other areas to hinder U.S. firms anyway. Washington also wants to make sure U.S. firms benefit quickly and that approvals don’t stretch out for years.

The U.S. is also focusing on how such a deal would be enforced. One way is to keep current tariffs on China and only remove them after Beijing has carried out its pledges.

On exports, Mr. Mnuchin has said that China is committing to buy an additional $1.2 trillion in U.S. goods and services, though he didn’t specify the time frame. Last year, the U.S. shipped $188 billion of goods and services to Beijing and ran a $336 billion deficit in total trade.


The additional exports would come from what China forecasts as an enormous boost in Chinese imports of services globally— $2.5 trillion over five years, China’s Commerce Ministry estimates. U.S. negotiators are also pressing China to ease restrictions on agricultural imports, which could pave the way for U.S. farmers to quickly expand exports of corn and other commodities.

The two sides are discussing opening China’s vast rice market to U.S. imports. The U.S. sold less than $2 million in rice to China last year

Write to Bob Davis at bob.davis@wsj.com