Published: Thu, October 10, 2019
Economy | By

China open to limited trade deal if Trump eases tariff threats

China open to limited trade deal if Trump eases tariff threats

Tensions between the USA and China appeared to ratchet up this week as the US imposed export restrictions on more than two dozen Chinese firms, citing their role in abuse of Muslim minorities, and put visa restrictions on Chinese officials.

Back on the trade front, without an agreement, additional tariffs are set to go into effect next Tuesday -with deeper tariffs targeting consumer goods scheduled to hit in December.

The Chinese yuan dropped 0.4 per cent in offshore trade to 7.1685 per dollar, touching its lowest level in five weeks.

With trade talks between the world's two largest economies, the U.S. and China, about to begin on Thursday, media reports suggest that Beijing is ready to negotiate a partial trade deal.

"We can add the Diplomatic war to the Financial war, Currency war and Technology war, that we already have", John Browning, managing director at brokerage BANDS Financial in Shanghai, said in a note to investors.

American negotiators led by Ambassador Robert Lighthizer, the United States trade representative, and Treasury Secretary Steven Mnuchin are entering this week's trade talks with low expectations for major progress on reaching a comprehensive deal months after negotiations broke down in May, according to two officials familiar with the situation.

The moves underscored just how jittery investors have become as negotiators meet in Washington to attempt a deal that could have major consequences for the global economy.

Based on the current situation, there is a possibility that this week's talks between the world's two largest economies could end in a deadlock, according to a Chinese official briefed on preparations for the talks who spoke on condition of anonymity. Despite what the news was saying, there is no inflation. "They've lost 3.5 million jobs and their supply chain is breaking up like a broken egg". Numerous companies rely on China for revenue and their supply chains. They want to make a deal.

China is unlikely to be willing to make an easy compromise with a U.S. president, who seems increasingly vulnerable to domestic political pressure as opposition Democrats seek to impeach him, Mitsubishi's Fujito added. "He can say, look, I made progress on some real significant things but I'm still tougher than anyone else has ever been".

"Our base case, to which we assign a 50 percent probability, is for only modest progress in this round of talks", said Mark Haefele, chief investment officer at UBS Global Wealth Management.

"You could call it worth or value of our country. It's stronger", he said.

"It's either a big deal or no deal", he said, adding that any attempt to reach an incremental bargain would be a "miscalculation by China". And if we can make a deal, we're going to make a deal. "There's a really good chance", Trump said.

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