US-China trade talks to resume this week
Talks aimed at ending the trade war between China and the US are set to resume as early as this week.
Larry Kudlow, director of the National Economic Council of the US and an advisor to Donald Trump, said at the end of last week that a face-to-face meeting was “on the cards”, while on Tuesday, Reuters said negotiations would start this week with a phone call between US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese vice premier Liu He.
A spokesperson for the US Trade Representative confirmed to Reuters that the call was expected to happen this week.
Negotiations between the two countries broke down in May, but at the G20 Summit in Japan in June, US president Donald Trump and his Chinese counterpart Xi Jinping agreed to resume talks. In what was seen as a positive sign, Trump also agreed not to impose tariffs on $300bn worth of Chinese imports, as previously threatened, and said he would allow US companies to continue to sell to controversial Chinese electronics firm Huawei.
Markets welcomed the news, but as the discussions get closer, concerns remain that the two countries will fail once again to reach an agreement.
Despite his comments at the G20, Trump has since continued to adopt a bullish stance, tweeting on Tuesday: “Very good numbers on the economy. Much potential for growth. Trade deals being negotiated or being set up for negotiation. We have been treated very unfairly (to put it mildly) by other countries for many years, but that is changing!’
Trump believes China has long benefitted from unfair advantages in global trade. The US wants China to make significant legal and legislative changes that would better protect American intellectual property and curb state subsidies, among other changes. China’s focus, meanwhile, is on scaling back tariffs.
To take note of, according to Reuters, which cited a Chinese official familiar with the situation, there was a "fairly large gap" in the core demands of the US and China in their trade talks, and according to other sources cited by the same newswire, Washington and Beijing appeared to come out of the G20 leaders' summit in Osaka with different ideas about what their two leaders had agreed.
Neil Wilson, chief market analyst at Markets.com, said: “While we had a degree of détente at the G20, existing tariffs are still in place and no meaningful progress has been registered. There’s a growing acceptance that the US and China are in this for the long haul. The US election cycle means we are unlikely to see a reason for Trump to do any deal until 2020.
“While the mood for now is upbeat, in the event of no deal, the lack of progress through the rest of the year would likely begin to drag on sentiment and affect equity markets. If corporates see additional tariffs being imposed, their EPS forecasts would need to be revised substantially lower.”
The trade war begin in July, with the US imposing tariffs on $50bn on Chinese goods and Beijing retaliating with its own tariffs. The spat escalated and America now has tariffs of 25% on $200bn of Chinese imports, and China on $60bn of US imports.
The row is increasingly weighing on the global economy. Late on Monday, German chemicals giant BASF became the latest company to blame the trade war after it warned on full-year profits.