Why slowing economies could prod U.S. and China to reach deal

07 January, 2019, 07:42 | Author: Trevor Moore
  • US manufacturers say Trump tariffs will bring higher prices, not more jobs

US President Donald Trump and Chinese President Xi Jinping agreed to the temporary truce on 1 December on the sidelines of the G20 summit in Argentina.

U.S. officials will travel to Beijing for talks on Monday and Tuesday next week, with China's Ministry of Commerce saying it hopes the talks will be "positive and constructive".

Evidence is piling up that tension between the world's two largest economies has dampened business confidence and depressed investment. The S&P 500 Index tumbled 2.5 per cent on Thursday amid mounting indications that USA business is starting to feel the pinch from the trade war.

China's leaders have offered to narrow its politically sensitive trade surplus with the United States by purchasing more soybeans, natural gas, and other American exports. "But right now, China is feeling the blow, really, of our tariffs, and I think that that's an appropriate place for us to have taken the relationship given the amount of stuff that they were stealing from us".

The talks will be divided into groups dealing with non-tariff measures, intellectual property, agriculture and industrial purchases, people familiar with the matter said.

In addition to Gerrish, the U.S. team will include the Office of the U.S. Trade Representative's top negotiator on agricultural issues, Gregg Doud; Treasury Under Secretary for International Affairs David Malpass; Commerce Under Secretary for International Trade Gilbert Kaplan; the U.S. Agriculture Department's under secretary for trade and foreign affairs, Ted McKinney; the U.S. Department of Energy's assistant secretary for fossil energy, Steven Winberg; and other senior officials.

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Since the Xi-Trump meeting, China has adopted several goodwill measures including cutting tariffs on vehicles imported from the U.S., resuming the purchase of soya beans from the country and submitting a draft law to prohibit forced technology transfers.

Kevin Hassett, chairman of the White House Council of Economic Advisers, said the contentious U.S. United States president Donald Trump has threatened a sharp hike in U.S. tariffs on Chinese goods if China didn't yield to his requests.

The risks to both economies have intensified since the last round of tit-for-tat tariffs in September.

The country´s manufacturing sector has also been hit by the trade dispute, contracting last month for the first time in over two years, according to official data.

Wendy Cutler, a former USA trade negotiator, said the US likely can't realistically settle for anything less than an agreement by Beijing to reform how it does business. The investment bank UBS said Friday that 37 percent of 200 manufacturers surveyed said they have shifted out of China over the past 12 months. The two sides face a March 1 deadline; the US has promised to hike its import tax from 10 percent to 25 percent on $200 billion of Chinese products if no deal is reached. On Thursday, privately held grains trader Cargill announced worse-than-expected results out of China.

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