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Trump says China trade deal may have to wait amid sticking points in talks

Published 12/03/2019, 05:04 PM
Updated 12/03/2019, 05:04 PM
© Reuters. FILE PHOTO: Trump meets Xi at the G20 leaders summit in Osaka, Japan

© Reuters. FILE PHOTO: Trump meets Xi at the G20 leaders summit in Osaka, Japan

By Steve Holland and William Schomberg

LONDON (Reuters) - President Donald Trump said on Tuesday a trade deal with China might have to wait until after the U.S. presidential election in November 2020, denting hopes that the two largest economies would soon reach an initial deal to ease their damaging trade war.

"I have no deadline, no," Trump told reporters in London, where he was due to attend a meeting of NATO leaders.

"In some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we'll see whether or not the deal's going to be right; it's got to be right."

Trump's remarks sent stock prices tumbling and triggered a rush into safe assets such as U.S. Treasury debt. MSCI's measure of global stock performance (MIWD00000PUS) slid 0.9%, while the U.S. benchmark S&P 500 Index (SPX) dropped 1.22%, its largest fall in nearly two months. Investors piled into government bonds, driving the yield on the 10-year U.S. Treasury note (US10YT=RR) to a one-month low near 1.7%. The dollar weakened against a basket (DXY) of key trading partners' currencies. Trump's comments came as sources in Beijing and Washington familiar with the talks said that the two countries have made progress, but are still wrangling over whether existing U.S. tariffs will be removed and over specific levels of Chinese purchases of U.S. agricultural products as part of a "phase one" trade deal.

"The Chinese side must have such a requirement, because the Chinese side has promised more U.S agricultural purchases. This is in a way, to some extent, a transaction," a Chinese source who advises Beijing on the talks told Reuters.

A Washington-based source briefed on the talks said that the U.S. side is willing to remove some tariffs, but wants additional concessions from Beijing to curb the forced transfer of American technology to Chinese firms.

While the deal being discussed includes new protections for trademarks, copyrights and other intellectual property, trade sources have said it would leave the most difficult technology transfer issues to future talks.

Trade experts say the most likely tariffs to be removed would be 15% duties imposed on Sept. 1 on about $125 billion of Chinese consumer goods, including smart speakers, Bluetooth headphones, television sets and footwear.

But Trump's most recent trade actions may leave Chinese officials concerned about whether he would uphold an initial deal.

On Monday, he said he would hit Brazil and Argentina with trade tariffs for "massive devaluation of their currencies".

The United States then threatened duties of up to 100% on French goods, from champagne to handbags, because of a digital services tax that Washington says harms U.S. tech companies.

"All of these things are affecting the Trump administration's credibility, but both sides have credibility problems," said Scott Kennedy, a China economics expert at the Center for Strategic and International Studies in Washington.

NO IN-PERSON TALKS

U.S. Commerce Secretary Wilbur Ross on Tuesday said that while staff-level talks are continuing with Chinese officials, no high-level meetings are scheduled.

If there is no deal or substantial progress in talks before Dec. 15, tariffs on remaining Chinese imports, including cell phones, laptop computers and toys, will take effect, Ross told CNBC on Tuesday.

"I think it's also important that the president make clear: he's under no time pressure to get it done. Because otherwise there's a tendency of the other side to say 'Oh, he needs it for political reasons, so we'll give him a worse deal than we would.' He's not going to play that game."

But Seema Shah, chief strategist at Principal Global Investors, said Trump could not afford a repeat of the stock market's sharp falls in late 2018, when he raised the temperature of the trade stand-off.

"The Chinese government believes that President Trump is desperate for a deal before the end of the year, when the race for the presidential election will really heat up," Shah said.

"Trump's latest comments are a ploy to regain the upper hand in these negotiations."

Washington and Beijing have yet to ink a "phase one" agreement announced in October, which had raised hopes of a de-escalation.

Trump and Chinese President Xi Jinping had planned to meet and sign the preliminary trade deal at an Asia-Pacific leaders' summit in Chile in mid-November, but the summit was canceled because of violent anti-government protests in Santiago.

Trump, who had said in September that he did not need a deal before the 2020 election, sought on Tuesday to put pressure on Beijing.

"The China trade deal is dependent on one thing - do I want to make it, because we are doing very well with China right now, and we can do even better with a flick of a pen," he said. "And China is paying for it, and China is having by far the worst year that they have had in 57 years. So we'll see what happens."

China reported its slowest economic growth in 27 years in October as the trade tensions with the United States hit its manufacturing sector.

© Reuters. FILE PHOTO: Trump meets Xi at the G20 leaders summit in Osaka, Japan

On Monday, before traveling to London, Trump said U.S. legislation backing protesters in Hong Kong was not making trade negotiations with China easier, but he believed Beijing still wanted a deal with the United States.

Latest comments

I agree with Trump it should wait till after the elections so the new Democratic president can get it right and not just use it as a political ploy to stir his base.
The headline you wont see: “Stock market continues to make new highs as federal reserve buys equities and lends cheap money to corporations”
Trump Trigger WWIII.
its the right time when its the right deal. I want the best deal for our country, not a fast deal thatu0027s best for my trading today and tomorrow. and what markets is XI dealing to trade with, Russia, Cuba, or N.Korea. Do they buy like we do?
I am not American, living in the Netherlands. In here we are very much amazed about what Trump can do, tell, lie and change his mind time over time. How do Americans cope with that? Seems the big mouth is still in control. IMO he is not been able to make a deal and his ego makes him telling to the world that he doesn't need a deal. His proud is more important that the economy and he will do serious harm to the US. We need strong worldleaders bringing stability, that's not in Trump's competence. Stop him before things get worse.
The deal will always be around the corner. Is a moving corner.
China is currently finding new markets for his imports and exports.
Brazil lol
Russia too, what about the silk road. Good point tRump has weaken US foreign policy.
deal, trump is long, no deal trump is short. Easy boys
this dummy president always talk make deal, then no deal for almost 2 years
Time for correction after all this hopium that doesn't even match the macro data.
that is a hearty 10-4!
Get ready middle class as your costs are about to go up.
Trump and his people really do not understand how to deal with the Chinese.
The only thing that will make China happy is if they can keep ripping us off.
100% tariffs until China capitulates. No half-a agreement.
Agreed. MAGA!
Trump just sending message to China that he wants a deal ASAP especially that Dec 15 is approaching
lol. wish we could wager hypotheses
too risky for Trump for next election nothing to be signed.
to some degree he has no choice since he can't veto the HK bill anyways.
Agree, personal opinion, he is better off having some sort of deal to calm the doubts
And the US is treating agreements in a very serious manner. Right now, US has the most honorable president who does what he says all the time!
it should be "who always changes what he said"
Trump must be replaced!
for China side Trump is not that bad. imagine Marco Rubio in n WH...
let's solve our trade problems and get rid of its cause...Trump must go!
Yeah let's just do nothing. The Left way.
Don the Con lies again lol.
Don't forget market was at Al time high and correction was needed, this news only contributed 25% taking nasdaq and Dow Jones down.
Trump is first business man then he is president on 14 th he will with draw tariff which where to be implemented
Trump already said this a while ago, didn't he? Why does the market still consider it a news?
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