Earlier, the Wall Street Journal reported that the trade talks between the two countries scheduled for June 2 in Beijing may be derailed by the fresh threat from Washington. The announcement by Trump – which seemed to tear up an agreement reached only 10 days ago in Washington – is the latest twist in a trade dispute between the US and China that has rattled financial markets for months and could threaten the broadest global upswing in years, according to the International Monetary Fund. A team of US officials was scheduled to arrive in Beijing yesterday to discuss the broad outline of the next round of talks, but if the two sides failed to reach agreement on what would be discussed, the trip – led by Commerce Secretary Wilbur Ross – could be cancelled, the Wall Street Journal report said.
Asian equities slid yesterday as the renewed tension over trade added to concerns over Italy’s political turmoil for investors. While the trade dispute poses a risk to China’s economic outlook, the two countries will likely find common ground, said Robin Xing, chief China economist at Morgan Stanley. He expects China will buy an additional $60bn to $90bn of American goods over several years as it seeks to address Trump’s criticisms over the trade surplus. “The two parties can reach a deal by China increasing imports,” Xing said yesterday in a Bloomberg Television interview from Beijing.“De-escalation over time through negotiation remains our base case because we see areas where China and the US can find some middle ground to make some mutually beneficial progress, for example to meet China’s own demand for upgrading consumption.”
Trump has vacillated in recent weeks on how hard to push Beijing over issues such as tariffs and intellectual property. The dispute began in March, when his administration first threatened to slap tariffs on as much as $50bn in Chinese shipments to punish Beijing for violating American IP rights. Trump is taking “measured” steps against China, aiming at protecting the “crown jewels” of American technology, White House trade adviser Peter Navarro told Fox Business’s Mornings With Maria programme yesterday. “We’re interested only in economic prosperity and national security,” Navarro said, adding that the US slapping 25% tariffs on $50bn of Chinese goods is bullish news for American companies and will be a “key part” of US policy going forward.
Trump’s latest U-turn was greeted with dismay in the Chinese state media, though pledges to retaliate were muted. “The world faces an extremely mercurial White House administration,” an editorial in China’s Global Times tabloid read. “The Chinese government has the ability and wisdom to handle such situations.” “With so many head-spinning reversals on trade from the US in recent weeks, we suspect the Chinese negotiators and the markets have started to tune out the noise and focus on the substance,” Tom Orlik, Bloomberg’s chief Asia economist in Beijing, wrote in a report. “So far, there’s not much of that in evidence.
Even if there were, our analysis suggests bilateral tariffs wouldn’t move the dial on China’s growth.” After Trump’s initial tariff threat, Beijing promised to retaliate in kind to any duties.
Sources and photo-credits: Bloomberg, Gulf Times