Tag Archives: trade negotiations

U.S., China move trade talks to Shanghai amid deal pessimism

Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019. REUTERS/Aly Song

By Michael Martina and David Lawder

BEIJING/WASHINGTON (Reuters) – U.S. and Chinese trade negotiators shift to Shanghai this week for their first in-person talks since a G20 truce last month, a change of scenery for two sides struggling to resolve deep differences on how to end a year-long trade war.

Expectations for progress during the two-day Shanghai meeting are low, so officials and businesses are hoping Washington and Beijing can at least detail commitments for “goodwill” gestures and clear the path for future negotiations.

These include Chinese purchases of U.S. farm commodities and the United States allowing firms to resume some sales to China’s tech giant Huawei Technologies.

President Donald Trump said on Friday that he thinks China may not want to sign a trade deal until after the 2020 election in the hope that they could then negotiate more favorable terms with a different U.S. president.

“I think probably China will say “Let’s wait,” Trump told reporters at the White House. “Let’s wait and see if one of these people who gives the United States away, let’s see if one of them could get elected.”

For more than a year, the world’s two largest economies have slapped billions of dollars of tariffs on each other’s imports, disrupting global supply chains and shaking financial markets in their dispute over China’s “state capitalism” mode of doing business with the world.

Trump and Chinese President Xi Jinping agreed at last month’s G20 summit in Osaka, Japan, to restart trade talks that stalled in May, after Washington accused Beijing of reneging on major portions of a draft agreement — a collapse in the talks that prompted a steep U.S. tariff hike on $200 billion of Chinese goods.

Trump said after the Osaka meeting that he would not impose new tariffs on a final $300 billion of Chinese imports and would ease some U.S. restrictions on Huawei if China agreed to make purchases of U.S. agricultural products.

CHIPS AND COMMODITIES

Since then, China has signaled that it would allow Chinese firms to make some tariff-free purchases of U.S. farm goods. Washington has encouraged companies to apply for waivers to a national security ban on sales to Huawei, and said it would respond to them in the next few weeks.

But going into the talks, neither side has implemented the measures that were intended to show their goodwill. That bodes ill for their chances of resolving core issues in the trade dispute, such as U.S. complaints about Chinese state subsidies, forced technology transfers and intellectual property violations.

U.S. officials have stressed that relief on U.S. sales to Huawei would apply only to products with no implications for national security, and industry watchers expect those waivers will only allow the Chinese technology giant to buy the most commoditized U.S. components.

Reuters reported last week that despite the carrot of a potential exemption from import tariffs, Chinese soybean crushers are unlikely to buy in bulk from the United States any time soon as they grapple with poor margins and longer-term doubts about Sino-U.S. trade relations. Soybeans are the largest U.S. agricultural export to China.

“They are doing this little dance with Huawei and ag purchases,” said one source recently briefed by senior Chinese negotiators.

White House economic adviser Larry Kudlow on Friday said he “wouldn’t expect any grand deal,” at the meeting and negotiators would try to “reset the stage” to bring the talks back to where they were before the May blow-up.

“We anticipate, we strongly expect the Chinese to follow through (on) goodwill and just helping the trade balance with large-scale purchases of U.S. agriculture products and services.” Kudlow said on CNBC television.

U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will meet with Chinese Vice Premier Liu He for two days of talks in Shanghai starting on Tuesday, both sides said.

“Less politics, more business,” Tu Xinquan, a trade expert at Beijing’s University of International Business and Economics, who closely follows the trade talks, said of the possible reason Shanghai was chosen as the site for talks.

“Each side can take a small step first to build some trust, followed by more actions,” Tu said of the potential goodwill gestures.

‘DO THE DEAL’

A delegation of U.S. company executives traveled to Beijing last week to stress to Chinese officials the urgency of a trade deal, according to three sources who asked to not be named. They cautioned Chinese negotiators in meetings that if a deal is not reached in the coming months the political calendar in China and the impending U.S. presidential election will make reaching an agreement extremely difficult.

“Do the deal. It’s going to be a slog, but if this goes past Dec. 31, it’s not going to happen,” one American executive told Reuters, citing the U.S. 2020 election campaign. Others said the timeline was even shorter.

Two sources briefed by senior-level Chinese negotiators ahead of the talks said China was still demanding that all U.S. tariffs be removed as one of the conditions for a deal. Beijing is opposed to a phased withdrawal of duties, while U.S. trade officials see tariff removal — and the threat of reinstating them — as leverage for enforcing any agreement.

China also is adamant that any purchase agreement for U.S. goods be at a reasonable level, and that the deal is balanced and respects Chinese legal sovereignty.

U.S. negotiators have demanded that China make changes to its laws as assurances for safeguarding U.S. companies’ know-how, an insistence that Beijing has vehemently rejected. If U.S. negotiators want progress in this area, they might be satisfied with directives issued by China’s State Council instead, one of the sources said. One U.S.-based industry source said expectations for any kind of breakthrough during the Shanghai talks were low, and that the main objective was for each side to get clarity on the “goodwill” measures associated with the Osaka summit.

There is little clarity on which negotiating text the two sides will rely on, with Washington wanting to adhere to the pre-May draft, and China wanting to start anew with the copy it sent back to U.S. officials with numerous edits and redactions, precipitating the collapse in talks in May.

Zhang Huanbo, senior researcher at the China Centre for International Economic Exchanges (CCIEE), said he could not verify U.S. officials’ complaints that 90 percent of the deal had been agreed before the May breakdown.

“We can only say there may be an initial draft. There is only zero and 100% – deal or no deal,” Zhang said.

 

(Reporting by Michael Martina and Kevin Yao in BEIJING, and David Lawder, Steve Holland and Makini Brice in Washington; Editing by Simon Webb and Daniel Wallis)

Prepare for difficult times, China’s Xi urges as trade war simmers

FILE PHOTO: Chinese President Xi Jinping attends the Conference on Dialogue of Asian Civilizations in Beijing, China May 15, 2019. REUTERS/Thomas Peter/File Photo

By Michael Martina and David Lawder

BEIJING/WASHINGTON (Reuters) – China must prepare for difficult times as the international situation is increasingly complex, President Xi Jinping said in comments carried by state media on Wednesday, as the U.S.-China trade war took a mounting toll on tech giant Huawei.

The world’s two largest economies have escalated tariff increases on each other’s imports after talks broke down to resolve their dispute, and the acrimony has intensified since Washington last week blacklisted Chinese telecom equipment company Huawei Technologies Co Ltd.

The listing, which curbs Huawei’s access to U.S.-made components, is a potentially devastating blow for the company that has rattled technology supply chains and investors, and saw several mobile carriers on Wednesday delay the launch of new Huawei smartphone handsets.

During a three-day trip this week to the southern province of Jiangxi, a cradle of China’s Communist revolution, Xi urged people to learn the lessons of the hardships of the past.

“Today, on the new Long March, we must overcome various major risks and challenges from home and abroad,” state news agency Xinhua paraphrased Xi as saying, referring to the 1934-36 trek of Communist Party members fleeing a civil war to a remote rural base, from where they re-grouped and eventually took power in 1949.

“Our country is still in a period of important strategic opportunities for development, but the international situation is increasingly complicated,” he said.

“We must be conscious of the long-term and complex nature of various unfavorable factors at home and abroad, and appropriately prepare for various difficult situations.”

The report did not elaborate on those difficulties, and did not directly mention the trade war or of the United States.

No further trade talks between top Chinese and U.S. negotiators have been scheduled since the last round ended on May 10, the same day President Donald Trump increased tariffs on $200 billion worth of Chinese goods and took steps to levy duties on all remaining Chinese imports.

Negotiations between the United States and China have stalled since early May, when Chinese officials sought major changes to the text of a proposed deal that the Trump administration says had been largely agreed.

However, Chinese Ambassador to the United States Cui Tiankai, speaking to the Fox News Channel, said on Tuesday that Beijing was still open for talks.

Repercussions of the blacklisting mounted for Huawei, with some mobile operators, including the Ymobile unit of Japan’s Softbank Corp and rival KDDI Corp putting launch plans for Huawei’s new P30 Lite smartphone on hold.

Another big Chinese tech firm, video surveillance equipment maker Hikvision Digital Technology Co Ltd, could also face limits on its ability to buy U.S. technology, the New York Times reported, citing people familiar with the matter, sending the firm’s Shenzhen-listed shares down 5.54 percent.

RETALIATION

While China has not said whether or how it may retaliate to the measures against Huawei, state media have taken an increasingly strident and nationalistic tone.

U.S. firms said in a survey released on Wednesday they were facing retaliation in China over the trade war. The American Chamber of Commerce of China and its sister body in Shanghai, said members reported that they faced increased obstacles such as government inspections, slower customs clearances and slower approval for licensing and other applications.

It also said that 40.7% of respondents were considering or had relocated manufacturing facilities outside China. Of the almost 250 respondents to the survey, which was conducted after China and the United States both raised tariffs on each other’s imports this month, almost three-quarters said the impact of tariffs was hurting their competitiveness.

To cope, about one third said they were increasingly focusing their China operations on producing for Chinese customers and not for export, while one third said they were delaying and canceling investment decisions.

Long considered a solid cornerstone in a relationship fraught with geopolitical frictions, the U.S. business community has in recent years advocated a harder line on what it sees as discriminatory Chinese trade policies.

The United States is seeking sweeping changes to trade and economic policies, including an end to forced technology transfers and theft of U.S. trade secrets. Washington also wants curbs on subsidies for Chinese state-owned enterprises and increased access for U.S. firms in Chinese markets.

China for years has blocked major U.S. tech firms, including Google and Facebook, from fully operating in its market. Those and other restrictions have fueled calls from within the U.S. business community for Washington to pursue more reciprocal policies.

Cui told Fox News Channel that U.S. restrictions on Huawei “are without any foundation and evidence” and could undermine the normal functioning of markets.

“Everybody knows Huawei is a privately owned company. It is just a normal Chinese private company,” Cui said. “So all the action taken against Huawei are politically motivated.”

(Reporting by David Lawder and Stella Qiu; Additional reporting by Makini Brice and Eric Beech in Washington and Michael Martina and Ben Blanchard; writing by Tony Munroe; Editing by Simon Cameron-Moore, Robert Birsel)

Wall Street plunges on heightening U.S.-China trade worries

By Amy Caren Daniel

(Reuters) – Wall Street’s main indexes tumbled more than 1 percent on Tuesday, as renewed worries over trade negotiations with China stoked global growth worries and kept investors away from risky assets.

Beijing said on Tuesday that Chinese Vice Premier Liu He will visit the United States this week for trade talks, playing down U.S. President Donald Trump’s unexpected threat on Sunday that he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

Trade tensions also pushed U.S. treasury yields lower as investors turned to low-risk government bonds, pressuring interest rate sensitive banking stocks, which fell 1.69%. [US/]

“Many had been looking at this week as providing a potential breakthrough in talks between the world’s two largest economies, yet we instead have seen the U.S. threaten a raft of new tariffs,” Joshua Mahony, senior market analyst at IG, wrote in a note.

“Much of the gains of the eventual deal have been factored into market valuations and thus there is a substantial risk that markets could jolt lower if the direction of talks shift towards more, rather than less barriers to trade.”

Boeing Co, the single largest U.S. exporter to China, slipped 2.7% and Caterpillar Inc declined 1.9%.

All the major S&P sectors were trading in the red, with technology companies posting the steepest decline of 2%.

The CBOE Volatility Index, a gauge of investor anxiety, spiked to its higher level in over three months.

At 10:55 a.m. ET the Dow Jones Industrial Average was down 355.41 points, or 1.34%, at 26,083.07. The S&P 500 was down 42.23 points, or 1.44%, at 2,890.24 and the Nasdaq Composite was down 138.67 points, or 1.71%, at 7,984.62.

Marquee names including Microsoft Corp, Apple Inc, Amazon.com Inc and Facebook Inc fell more than 1.7% and weighed on markets.

The earnings season has now reached its homestretch. Of the 414 S&P companies that have reported earnings so far, about 75% have surpassed analysts’ estimates, according to Refinitiv data.

The upbeat reports have turned around earnings estimates for the first quarter to an almost 1.2% rise, a sharp improvement from the 2.3% decline expected at the start of the earnings season.

American International Group Inc jumped 6.7%, the most among S&P companies, after the insurer reported a quarterly profit that blew past expectations.

Among decliners, Mylan NV tumbled 17% after the drugmaker missed Wall Street estimates for quarterly revenue, hurt partly by manufacturing problems at its Morgantown plant in West Virginia.

Shares of Regeneron Pharmaceuticals Inc fell 5% after the drugmaker missed quarterly profit estimates.

Declining issues outnumbered advancers for a 4.26-to-1 ratio on the NYSE and for a 2.95-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and four new lows, while the Nasdaq recorded 37 new highs and 22 new lows.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur)

U.S.-China trade talks will likely conclude in next two weeks: Mulvaney

FILE PHOTO: Mick Mulvaney testifies before the House Appropriations Subcommittee on Financial Services and General Government on Capitol Hill in Washington, U.S., April 18, 2018. REUTERS/Aaron P. Bernstein/File Photo

By Matt Scuffham and Svea Herbst-Bayliss

BEVERLY HILLS, Calif. (Reuters) – Talks between the United States and China aimed at resolving their trade dispute will likely be resolved “one way or the other” in the next two weeks, White House chief of staff Mick Mulvaney said on Tuesday.

“It won’t go on forever. I think, at some point, in any negotiation, you realize we’re close to getting something done so we’re going to keep going,” Mulvaney said at the Milken Institute Global Conference. “On the other hand, at some point, you can think this is not going to get anywhere. I think you will know, one way or the other, in the next couple of weeks.”

Mulvaney spoke only days after data came out showing that the United States economy grew stronger than expected 3.2 percent during the first three months of the year and said that strong growth is going to help support President Donald Trump as he prepares for the 2020 election.

“We think the economy has been good for everyone,” Mulvaney said. “We can ride that to the 2020 election. People know what is good for them.”

Mulvaney said policymakers are focusing on solving wage inequality.

He said the White House plans to make strong economic growth, at a time the expansion is well into its 10th year, healthcare and trade into key topics for the campaign. He also said Trump, a Republican, will benefit from the fact that Democrats have more than a dozen candidates running for president and “we have weak competitors.”

Mulvaney currently is acting chief of staff but he said he expects to keep the job permanently and that he has improved morale in the White House since replacing John Kelly in the job in January.

He said he does not expect a lot of change in top administration positions before the election. The Trump administration has had an especially high rate of turnover with his homeland security secretary being among the most recent to leave.

(Reporting by Matt Scuffham and Svea Herbst-Bayliss; Editing by Bill Trott)

Trump-Xi trade summit won’t happen in March, Mnuchin says

FILE PHOTO: U.S. Treasury Secretary Steven Mnuchin testifies at U.S. House Ways and Means Committee hearing on President Donald Trump's proposed budget in Washington, U.S., March 14, 2019. REUTERS/Mary F. Calvert

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin said on Thursday that a trade summit between President Donald Trump and Chinese President Xi Jinping would not happen at the end of March as had been previously suggested because there was still more work to do in U.S.-China trade negotiations.

Speaking to reporters after a U.S. Senate hearing, Mnuchin also said he was not concerned about U.S. banks’ exposure to Britain’s banking sector amid uncertainty over the country’s looming exit from the European Union because institutions on both sides of the Atlantic were healthy.

(Reporting by David Lawder; Editing by James Dalgleish)

U.S.-China trade talks progressing well via video conference: USDA official

FILE PHOTO: U.S. and Chinese flags are seen before Defense Secretary James Mattis welcomes Chinese Minister of National Defense Gen. Wei Fenghe to the Pentagon in Arlington, Virginia, U.S., November 9, 2018. REUTERS/Yuri Gripas

WASHINGTON (Reuters) – Trade negotiations between the United States and China are progressing well via video conference, a senior official at the U.S. Department of Agriculture said on Wednesday.

“The talks are going well,” Ted McKinney, Undersecretary for Trade and Foreign Agriculture Services told a press call. “Presently there’s a lot of discussions going on by digital video conference, also a very good and productive thing,” he said.

“Right now, I think there’s just a lot of work in getting words down … a contract or agreement, and that’s the current status,” he added.

Washington and Beijing have been locked in intense negotiations to end the trade war between the world’s two largest economies. President Donald Trump, citing progress in talks, last week delayed a planned tariff increase to 25 percent from 10 percent on $200 billion of Chinese goods.

The United States has demanded that China make substantial changes to its laws and practices to protect U.S. intellectual property, end forced transfers of U.S. technology to Chinese firms, curb generous industrial subsidies and open the domestic market to U.S. companies.

In addition, Washington has sought increased Chinese purchases of U.S. goods, including farm and energy commodities and manufactured products, to reduce a U.S. trade deficit with China that it estimates at more than $417 billion for 2018.

People familiar with the talks told Reuters the two sides still had substantial work ahead to reach agreement on a way to ensure China follows through on any pledges. Talks could still collapse if a deal cannot be reached on enforcement of these “structural” issues.

McKinney said he did not know of any firm plans for a U.S. delegation to go back to China for further negotiations but added that such a trip would not come as a surprise.

(Reporting by Humeyra Pamuk in Washington; Editing by James Dalgleish)