Tag Archives: trade war

Oil falls 3% as trade war concerns hit demand outlook

FILE PHOTO: An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann/File Photo

By Collin Eaton

HOUSTON (Reuters) – Oil prices tumbled more than 4% on Wednesday to a seven-month low, extending recent heavy losses following a surprise build in U.S. crude stockpiles and fears that demand will shrink due to Washington’s escalating trade war with Beijing.

Brent crude futures <LCOc1> were down $2.52, or 4.3%, at $56.42 a barrel by 11:57 a.m. CDT (1657 GMT), setting a seven-month low. Prices have lost more than 20% since their 2019 peak in April.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down $2.36, or 4.4%, at $51.25.

Oil fell early on worries about the trade war, then extended losses after U.S. government data showed a build of 2.4 million barrels in U.S. stockpiles instead of the 2.8 million draw analysts had expected. U.S. crude oil inventories are about 2% above the five-year average for this time of year.

Gasoline inventories rose 4.4 million barrels, with U.S. Gulf Coast gasoline stocks hitting the highest on record for this time of year, the U.S. Energy Information Administration (EIA) data showed.

After seven weeks of consecutive crude drawdowns, “there was a thought that today’s report would turn oil’s fortunes around,” said John Kilduff, partner at Again Capital LLC in New York. “That support got taken out of the market.”

Brent has plunged more than 12% since last week as global equity markets went into a tailspin after U.S. President Donald Trump said he would slap a 10% tariff on a further $300 billion in Chinese imports from Sept. 1.

“The market continues to trade lower on concerns about demand growth and the idea that economic growth can be impacted by the trade war,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford Connecticut.

“The market isn’t concerned about anything other than how demand is going to play out through the rest of the year,” he said.

This week, the EIA reduced its forecast U.S. demand for crude and liquid fuels. The agency also cut its forecast for global crude and liquids consumption by 0.1% for both 2019 and 2020.

Meanwhile, U.S. crude production was set to rise 1.28 million bpd to 12.27 million bpd this year.

“People saw those numbers and it put a negative vibe in the market,” said Robert Yawger, director of energy futures at Mizuho in New York.

U.S. crude could fall to around the low-$40 a barrel range unless bearish sentiment changes, but U.S. oil production is still surging and the stock market is signaling rising fears of an economic downturn, said Josh Graves, senior market strategist at RJO Futures in Chicago.

“We could keep following the trend lower,” Graves said. “Crude oil inventories were disappointing and the stock market is in worrisome territory.”

Trump on Tuesday dismissed fears that the trade row with China could be drawn out further. Still, U.S. stock indexes tumbled more.

Demand for safe-haven assets such as government debt underscored lingering anxiety over recession risks.

Tensions in the Middle East remained high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.

Saudi Energy Minister Khalid al-Falih and U.S. Energy Secretary Rick Perry on Tuesday expressed mutual concern over threats targeting freedom of maritime traffic in the Gulf.

(Additional reporting by Ron Busson, Jane Chung; Editing by Marguerita Choy and David Gregorio)

Trump vows to help farmers as China halts U.S. agricultural purchases

FILE PHOTO: U.S. Dollar and China Yuan notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo/File Photo

By Susan Heavey

WASHINGTON (Reuters) – U.S. President Donald Trump on Tuesday vowed to protect American farmers against China by signaling to provide further aid if needed, a day after Chinese firms stopped agricultural purchases and Beijing threatened more tariffs on U.S. farm products.

“Our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do – And I’ll do it again next year if necessary!” Trump tweeted on Tuesday.

U.S. farmers, a key political constituency for Trump, have been among the hardest hit in the trade war between the world’s two largest economies. Shipments of soybeans, the most valuable U.S. farm export, to top buyer China sank to a 16-year low in 2018.

To compensate for the losses, the Trump administration has rolled out up to $28 billion in federal aid since the trade war began last year, and the Agriculture Department to date has made $8.6 billion of direct aid payments to farmers.

The latest federal aid package of up to $16 billion was rolled out in July and the first tranche for the payments are expected to begin in mid-to-late August.

Promises of large agricultural purchases by China have been a key element of a potential trade deal, but Trump last week said Beijing had not fulfilled a promise to buy large volumes of U.S. farm products and vowed to impose a 10% tariff on a further $300 billion in Chinese imports starting Sept. 1.

On Monday, China’s Commerce Ministry said Chinese companies have stooped buying U.S. farm products and added that Beijing may also impose additional tariffs on American agricultural goods, a move that could further hurt U.S. farm states that are key for Trump’s 2020 re-election bid.

Overall, China has purchased about 14.3 million tonnes of last season’s soybean crop, the least in 11 years, and some 3.7 million tonnes still need to be shipped, according to U.S. data. China bought 32.9 million tonnes of U.S. soybeans in 2017.

(Reporting by Susan Heavey; Additional reporting and writing by Humeyra Pamuk; Editing by Bernadette Baum and Paul Simao)

China warns of retaliation after Trump threatens fresh tariffs

By Andrea Shalal, Alexandra Alper and Huizhong Wu

BEIJING/WASHINGTON (Reuters) – China on Friday said it would not be blackmailed and warned of retaliation after U.S. President Donald Trump vowed to slap a 10% tariff on $300 billion of Chinese imports from next month, sharply escalating a trade row between the world’s biggest economies.

Trump stunned financial markets on Thursday by saying he plans to levy the additional duties from Sept. 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains.

Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.

“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua told a news briefing in Beijing.

“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle we won’t give an inch,” she said, adding that China hoped the United States would “give up its illusions” and return to negotiations based on mutual respect and equality.

Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.

The newly threatened duties, which Trump announced in a series of tweets after his top trade negotiators briefed him on a lack of progress in talks in Shanghai this week, would extend tariffs to nearly all Chinese goods that the United States imports.

The president later said if trade discussions failed to progress he could raise tariffs further – even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.

Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand that additional tariffs were “definitely not a constructive way to resolve economic and trade frictions”.

U.S. Secretary of State Mike Pompeo, who was also in Bangkok, decried “decades of bad behavior” by China on trade and said Trump had the determination to fix it.

The news hit financial markets hard. On Friday, Asian and European stocks took a battering and safe-haven assets such as the yen, gold and government bonds jumped as investors rushed for cover.

Retail associations in the United States predicted a spike in consumer prices, hitting consumer stocks on Thursday on Wall Street, where Target Corp tumbled 4.2%, Macy’s Inc fell 6% and Nordstrom Inc was down 6.2%.

Asked about the impact on financial markets, Trump told reporters: “I’m not concerned about that at all.”

Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.

The tariffs may also force the Federal Reserve to again cut interest rates to protect the U.S. economy from trade-policy risks, experts said.

CHINESE RETALIATION?

One Chinese official told Reuters it was not the first time Trump had “flip-flopped”, and that though the time between the talks being declared constructive and Trump’s threat of new tariffs was short, officials in Beijing were already prepared.

“Discussion followed by a fight has become the normal pattern,” the official said.

Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths that are used in everything from military equipment to consumer electronics, and penalties against U.S. companies in China, analysts say.

So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of U.S. goods since the trade war broke out last year.

China is also drafting a list of “unreliable entities” – foreign firms that have harmed Chinese interests. U.S. delivery giant FedEx is under investigation by China.

“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.

“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming U.S. presidential election,” Pang said.

FRUSTRATED

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump earlier this week on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 summit at the end of June and agreed to a ceasefire in the trade war.

“When my people came home, they said, ‘We’re talking. We have another meeting in early September.’ I said, ‘That’s fine, but until such time as there’s a deal, we’ll be taxing them,” Trump told reporters.

A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.

Previous negotiations collapsed in May, when U.S. officials accused China of backing away from earlier commitments.

American business groups in China expressed disquiet over the latest round of U.S. tariffs. The U.S.-China Business Council said on Friday it was concerned the action “will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai”.

“We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against U.S. companies in government procurement tenders,” said the U.S.-China Business Council’s President Craig Allen in an e-mail.

Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, said that as market access in China “remains unnecessarily restricted”, the United States should continue its dialogue with Beijing, and “also work with like-minded countries to persuade China that fair and reciprocal trade and investment benefits all.”

CROPS AND DRUGS

Trump said Beijing had failed to fulfill promises to stop sales of the synthetic opioid fentanyl to the United States, which U.S. officials say was to blame for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

He also said Beijing had not followed through on a goodwill pledge to buy more U.S. agricultural products.

The U.S. Department of Agriculture on Thursday confirmed a small private sale to China of 68,000 tonnes of soybeans in the week ended July 25.

The United States also has yet to ease restrictions on U.S. companies’ sales to Chinese telecommunications giant Huawei, which Trump had pledged as a goodwill gesture to Xi after meeting at the G20 in Osaka.

(Reporting by Andrea Shalal, Alexandra Alper, Steve Holland, David Lawder, Tim Ahmann, Susan Heavey, Makini Brice, Nandita Bose and Jonathan Landay in Washington; and Huizhong Wu, Xu Jing, Stella Qiu, Se Young Lee, and Min Zhang in Beijing; and Brenda Goh in Shanghai; Writing by Ryan Woo and Michael Martina; Editing by Grant McCool, Shri Navaratnam and Alex Richardson)

Trump threatens new tariffs as U.S.-China trade tensions spike again

FILE PHOTO: Farmer Dave Walton holds soybeans in Wilton, Iowa, U.S. May 22, 2019. Picture taken May 22, 2019. REUTERS/Kia Johnson

By David Lawder and Andrea Shalal

WASHINGTON (Reuters) – U.S. President Donald Trump on Thursday moved to impose a 10% tariff on a remaining $300 billion list of Chinese imports starting Sept. 1, after U.S. and Chinese negotiators failed to kickstart trade talks between the world’s two largest economies.

The levies – which would hit a wide swath of consumer goods from cell phones and laptop computers to toys and footwear – ratchet up tensions in a war of tit-for-tat tariffs that have disrupted global supply chains and roiled financial markets for more than a year.

U.S. stocks fell after the news and oil prices plummeted, and further fallout was expected. The IMF has warned that tariffs already in place will shave 0.2% off global economic output in 2020.

The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, lost significant ground after Trump tweeted about the tariffs, and was last down 0.6% on the day. Benchmark U.S. Treasury yields also fell.

“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%,” Trump tweeted.

Trump also faulted China for not making good on promises to buy more American agricultural products and criticized China’s President Xi Jinping for failing to do more to stem sales of the synthetic opioid fentanyl.

The president’s tweets followed a briefing by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on their talks in Shanghai, their first face-to-face meeting with Chinese officials since Trump and Xi agreed to a trade ceasefire at a G20 summit in June.

The talks ended on Wednesday with little sign of progress, although both countries described the negotiations as constructive. Another round of meetings between the negotiators has been scheduled for September.

Trump had been pressing Xi to crack down on a flood of fentanyl and fentanyl-related substances from China, which U.S. officials say is the main source of a drug blamed for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

Xi promised Trump at a summit in Argentina in December that Beijing would take action. China had pledged that from May 1 it would expand the list of narcotics subject to state control to include the more than 1,400 known fentanyl analogs, which have a slightly different chemical makeup but are addictive and potentially deadly, as well as any new ones developed in the future.

Talks between the United States and China collapsed in May after U.S. officials accused China of pulling back from earlier commitments. Washington sharply hiked tariffs on $200 billion worth of Chinese goods and Beijing retaliated, escalating the trade dispute.

Trump subsequently threatened to impose 25% sanctions on the remaining $300 billion in Chinese imports, prompting warnings from Walmart and other major U.S. retailers of a sharp spike in consumer prices. Thursday’s tweets indicated those goods would face a lower tariff rate than initially threatened.

While the United States bemoans the lack of larger Chinese agricultural purchases, Beijing has been pressing Washington to relax restrictions on sales to Chinese telecommunications giant Huawei as it had promised.

The U.S. Department of Agriculture on Thursday confirmed private sales to China of 68,000 tonnes of soybeans in the week ended July 25.

The sale was the first to a private buyer since Beijing offered to exempt five crushers from the 25% import tariffs imposed more than a year ago. Soybean futures opened lower on Thursday as traders shrugged off the small amount, and losses accelerated after Trump’s tweets.

(Additional reporting by Stella Qiu and Beijing Monitoring Desk; additional reporting by David Lawder, Jonathan Landay and Andrea Shalal in Washington and Mark Weinraub and Karl Plume in Chicago; Editing by Sonya Hepinstall)

China buys U.S. soybeans for first time since June

FILE PHOTO: Soybeans fall into a bin as a trailer is filled at a farm in Buda, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker/File Photo

By Mark Weinraub and Karl Plume

CHICAGO (Reuters) – The U.S. Department of Agriculture on Thursday confirmed private sales to China of 68,000 tonnes of soybeans for the 2019/20 marketing year, the first such purchase by a private buyer since the trade war between the world’s two largest economies broke out more than a year ago.

It was the first new soybean purchase by China since a 544,000-tonne sale was announced in late June, and the first since Beijing offered to exempt five private crushers in the country from 25-percent import tariffs on U.S. beans arriving by the end of the year.

In its weekly export sales report, the USDA also said China bought 66,800 tonnes of soybeans for 2018/19 delivery, including 62,000 tonnes that had previously been listed as headed for unknown destinations. But China also canceled previous purchases totaling 72,900 tonnes for the current marketing year, USDA said.

Widespread market rumors last week suggested that a large Chinese crusher purchased a small number of soybean cargoes for shipment in October from terminals in the U.S. Pacific Northwest, traders said.

Prices for soybeans shipped to Asia from the PNW this autumn are lower than prices for beans shipped from rival exporter Brazil if China’s import tariffs are removed, U.S. export traders said.

Large purchases, however, are not expected as China’s hog herd, the largest consumer of the soybean meal produced from raw beans, has been decimated by the deadly African swine fever. Soy crushing margins are also unprofitable, limiting demand.

Although just a fraction of the 87 million tonnes of soybeans the world’s top buyer is expected to import over the 2019/20 (Sept/Aug) season, the purchase was significant. The 25-percent tariff on U.S. soybeans made imports from rival suppliers like Brazil and Argentina far more attractive to private crushers.

Chinese state-owned firms have purchased some 14 million tonnes of U.S. soy since an initial trade war truce was struck by U.S. President Donald Trump and China’s Xi Jinping in December, but less than 10 million tonnes have been shipped so far.

Latest U.S.-China trade talks called ‘constructive’ by both sides

Chinese Vice Premier Liu He, at right, looks over as United States Trade Representative Robert Lighthizer, third from left gestures near Treasury Secretary Steve Mnuchin, second from left before the start of talks at the Xijiao Conference Center in Shanghai, China July 31, 2019. Ng Han Guan/Pool via REUTERS

By Brenda Goh and David Stanway

SHANGHAI (Reuters) – U.S. and Chinese negotiators wrapped up a brief round of trade talks on Wednesday that both sides described as “constructive,” including discussions over further Chinese purchases of American farm goods and an agreement to reconvene in September.

The first face-to-face talks since a ceasefire was agreed to last month in the trade war between the world’s two largest economies amounted to a working dinner on Tuesday at Shanghai’s historic Fairmont Peace Hotel and a half-day meeting on Wednesday, before U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin flew out.

“The meetings were constructive, and we expect negotiations on an enforceable trade deal to continue in Washington … in early September,” White House spokeswoman Stephanie Grisham said in a statement.

“Both sides, according to the consensus reached by the two leaders in Osaka, had a candid, highly effective, constructive and deep exchange on major trade and economic issues of mutual interest,” China’s Commerce Ministry said in a statement shortly after the U.S. team left Shanghai.

It was not immediately clear what, if any, further agricultural products China agreed to buy from the United States and when – an issue that had become a bone of contention after U.S. President Donald Trump said China had not made good on promised purchases.

“The Chinese side confirmed their commitment to increase purchases of United States agricultural exports,” the White House’s Grisham said, offering no other details.

Representatives for the U.S. Trade Representative’s office did not immediately respond to a request for comment.

The Chinese statement said negotiators discussed more Chinese purchases of agricultural products from the United States, but did not say there was any agreement to buy more.

The talks began amid low expectations. Trump on Tuesday warned China against waiting out his first term to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest, the outcome will be worse for China.

Fresh fears over the trade war and concerns about a protracted fight with little near-term progress weighed on global markets on Wednesday.

Chinese Foreign Ministry spokeswoman Hua Chunying said on Wednesday that she was not aware of the latest developments during the talks, but that it was clear it was the United States that continued to “flip flop”.

“I believe it doesn’t make any sense for the U.S. to exercise its campaign of maximum pressure at this time,” Hua told a news briefing in response to a question about the tweets.

“It’s pointless to tell others to take medication when you’re the one who is sick,” she said.

EARLY FINISH

The U.S.-China trade war has disrupted global supply chains and shaken financial markets as each side has slapped tariffs on billions of dollars of each other’s goods.

An official Chinese government survey released on Wednesday showed factory activity shrank for the third month in a row in July, underlining the growing strains the dispute has placed on the No. 2 economy.

The Shanghai talks were expected to center on “goodwill” gestures, such as Chinese commitments to purchase U.S. agricultural commodities and steps by the United States to ease some sanctions on Chinese telecoms equipment giant Huawei Technologies Co Ltd, a person familiar with the discussions told Reuters earlier.

Those issues are somewhat removed from the primary U.S. complaints in the trade dispute such as Chinese state subsidies, forced technology transfers and intellectual property violations – all topics the White House in its statement said were discussed. China’s account of the discussions did not mention any of the non-agricultural issues.

Trump and Chinese President Xi Jinping agreed in June at the 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. The collapse in talks prompted a steep U.S. tariff hike on $200 billion of Chinese goods.

The U.S. Commerce Department put Huawei on a national security blacklist in May, effectively banning U.S. firms from selling to Huawei, a move that enraged Chinese officials.

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.

But so far, U.S. semiconductor and software makers are still mostly in the dark about the administration’s plans.

In Sao Paulo on Tuesday, U.S. Commerce Secretary Wilbur Ross said decisions on license applications by U.S. firms to resume some sales to Huawei could come as early as next week.

Hu Xijin, editor-in-chief of China’s nationalistic Global Times tabloid, run by the ruling Communist Party’s People’s Daily newspaper, wrote on Twitter that the negotiators had “efficient and constructive” exchanges.

“The two sides discussed increasing purchase of U.S. farm products and the U.S. side agreed to create favorable conditions for it. They will hold future talks,” Hu said, without elaborating.

(Reporting by Brenda Goh, David Stanway, Yilei Sun, Engen Tham, and Josh Horwitz in Shanghai, and Huizhong Wu in Beijing; and Roberta Rampton, David LAwder and Andrea Shalala in Washington; Writing by Michael Martina in Beijing and Susan Heavey in Washington; Editing by Simon Cameron-Moore, Kim Coghill and Will Dunham)

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)

White House adviser doesn’t expect grand deal from next week’s China trade talks

White House chief economic advisor Larry Kudlow leaves after speaking with reporters on the driveway outside the West Wing of the White House in Washington, U.S. July 26, 2019. REUTERS/Yuri Gripas

WASHINGTON (Reuters) – White House economic adviser Larry Kudlow said on Friday he does not expect a grand deal from next week’s trade talks with China but that U.S. negotiators hoped to reset the stage for further productive talks on reducing trade barriers.

“They’re going to meet next week in Shanghai,” Kudlow said in an interview with CNBC. “I wouldn’t expect any grand deal. I think, talking to our negotiators, they’re going to kind of reset the stage and hopefully go back to where the talks left off last May.”

“We were doing well. No deal yet, but still on the structural issues, regarding IP (intellectual property) theft, forced transfer of technology, cyber interference, trade and non-trade, tariff barriers and so forth, certainly the enforcement mechanisms,” Kudlow added. “But if we were 90 percent there with 10 percent to go … I think our negotiators want to go back to that spot.”

Kudlow said the United States strongly expected China to make goodwill purchases of U.S. agricultural products.

The White House said on Wednesday that U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer would meet with Chinese Vice Premier Liu He for talks in Shanghai starting on July 30.

It would be their first face-to-face meeting since Presidents Donald Trump and Xi Jinping agreed to revive talks to end their yearlong trade war.

Talks collapsed in May after China reneged on promises made in earlier negotiations, U.S. government and private-sector sources said at the time.

The governments of the world’s largest economies have levied billions of dollars of tariffs on each other’s imports, disrupted global supply chains and shaken financial markets in their dispute over how China does business with the rest of the world.

(Reporting by Makini Brice; writing by David Alexander; editing by Jonathan Oatis)

U.S. says trade aid payments to farmers to range from $15 – $150 per acre

FILE PHOTO: A farmer drives tractor along a road in Pearl City, Illinois, U.S., July 25, 2018. REUTERS/Joshua Lott

The U.S. government will pay American farmers hurt by the trade war with China aid ranging between $15 to $150 per acre starting from mid- to late August, Department of Agriculture officials said on Thursday, as part of President Donald Trump’s up to $16 billion support package.

The fresh aid program would be the second round of assistance for farmers after the USDA’s $12 billion plan last year to compensate for lower prices for farm goods and lost sales stemming from trade disputes with China and other nations.

Agriculture Secretary Sonny Perdue said farmers have been disproportionately hurt by the trade dispute with China and therefore a fresh round of aid was justified. “They are fighting the fight and they are on the front line,” he said.

U.S. farmers, a key Trump constituency, have been among the hardest hit in the trade war between the world’s two largest economies. Soybeans are the most valuable U.S. farm export, and shipments to China dropped to a 16-year low in 2018.

In the new package, the USDA has developed varying county rates, calculated based on estimated trade damage caused by retaliatory tariffs imposed by China, the top export market for many U.S. agricultural products.

Sign-ups for the payments will begin on Monday and last until Dec. 6, USDA officials said in a conference call. Additional tranches of the payments are scheduled for November and January but will be subject to whether the trade disputes with China and other countries are still ongoing or not by then.

To be considered eligible for payments, acreage of non-specialty crops and cover crops must be planted by Aug. 1, 2019, the USDA said.

The number of farm acres that could not be planted due to weather were at historic levels this year, USDA officials said but added that the department was still working to finalize its estimate.

(Reporting by Humeyra Pamuk; additional reporting by P.J. Huffstutter and Karl Plume in Chicago; writing by Caroline Stauffer; editing by Chizu Nomiyama and Jonathan Oatis)

U.S.-China officials discuss trade; Mnuchin eyes possible in-person talks

FILE PHOTO: Treasury Secretary Steven Mnuchin testifies before the House Financial Services Committee hearing on "The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System" in Washington, U.S., May 22, 2019. REUTERS/Mary F. Calvert

CHANTILLY, France/WASHINGTON (Reuters) – U.S. and Chinese officials spoke by telephone on Thursday as the world’s two largest economies seek to end a year-long trade war, with U.S. Treasury Secretary Steven Mnuchin suggesting in-person talks could follow.

Mnuchin and U.S. Trade Representative Robert Lighthizer spoke with their Chinese counterparts over the phone, Lighthizer’s office said on Thursday, following earlier comments by the Treasury secretary in an interview on the sidelines of the G7 meeting in Chantilly, France.

The United States and China have been embroiled in a tit-for-tat tariff battle since July 2018, as Washington presses Beijing to address what it sees as decades of unfair and illegal trading practices.

China has countered that any deal needs to be fair and equitable, leaving the two sides apparently still far from an agreement to end the back-and-forth that has roiled global supply chains and upended financial markets.

“Right now we’re having principal-level calls and to the extent that it makes sense for us to set up in-person meetings, I would anticipate that we would be doing that,” Mnuchin told Reuters.

Asked if Thursday’s call could lead to a face-to-face meeting, Mnuchin said: “It’s possible, but I’m not going to speculate on the outcome.”

Lighthizer’s office later confirmed that the conversation took place as scheduled, but gave no details.

China’s foreign ministry said on Friday the two sides had discussed ways to implement the consensus reached by the two countries’ presidents, but gave no other details.

Separately, Su Ge, former president of the China Institute of International Studies, a think tank affiliated with China&rsquo;s Foreign Ministry, said he expected more formal discussions to resume this month.

“These are difficult questions … but at least they agreed to let the two negotiation teams to restart their work, so we will keep our fingers crossed,” he said.

William Lee, chief economist for the Milken Institute, said tensions were simmering, with neither China nor the United States appearing ready to budge on critical issues.

“That high level of trade uncertainty is causing manufacturing firms to be reticent to make investments. That high degree of uncertainty is a drag on U.S. growth,” he said. “The real issue is that China wants respect. China wants a face-saving way of coming to the table.”

TARIFFS AND PROMISES

Global stocks were rattled this week after U.S. President Donald Trump reiterated threats to impose further tariffs on Chinese imports. Signs that the trade dispute was starting to take a toll on corporate earnings further unnerved investors, sending stocks lower on Thursday.

“We have a long way to go as far as tariffs, where China is concerned, if we want. We have another $325 billion that we can put a tariff on if we want,” Trump said at a cabinet meeting on Tuesday.

Trump and Chinese President Xi Jinping agreed during a Group of 20 nations summit in Japan last month to resume discussions, easing fears of escalation after talks broke down in early May. At the time of the G20, Trump agreed to suspend a new round of tariffs on $300 billion worth of imported Chinese consumer goods while the two sides resumed negotiations.

“What they did was not appropriate,” Trump said Tuesday. “They are supposed to be buying farm products. Let&rsquo;s see whether or not they do.”

U.S. government data published on Thursday showed China last week made its largest purchase of U.S. sorghum since April. Sorghum was one of the first casualties of the trade war, which has slowed exports of soybeans and pork to China.

Asked about the role of Huawei Technologies Co Ltd, which the administration has blacklisted over national security concerns, Mnuchin said on Thursday that allowing any U.S. sales to the Chinese telecoms equipment company was an issue independent from the trade talks.

After meeting with Xi at the G20, Trump said American firms could sell products to Huawei. Earlier this month, Commerce Secretary Wilbur Ross said licenses would be issued where there is no threat to national security.

Reuters reported on Sunday that the United States may approve licenses for companies to restart new sales to Huawei in as little as two weeks, according to a senior U.S. official.

Mnuchin denied a Wall Street Journal report last week that the Treasury chief was urging U.S. suppliers to seek exemptions to sell to Huawei, saying he talks to corporate executives about many issues, including trade.

“My participation in this is only informational. I&rsquo;ve never encouraged companies one way or the other to do things.”

The Wall Street Journal reported this week that discussions were at a standstill as Washington weighs limits over business with Huawei.

Derek Scissors, a scholar at the American Enterprise Institute think tank who has advised the White House on technology issues, said he expected further relaxations on Huawei to be part of any U.S.-China trade deal.

“The treatment of Huawei has been a circus,” he told a panel hosted by the Brookings Institution. “If we have a deal, Huawei will absolutely be part of it because the president doesn’t care … about technology competition.”

He said Trump was more focused on getting a trade deal and increasing access for U.S. farmers to Chinese markets.

(Reporting by David Lawder in Chantilly, France, Susan Heavey and Andrea Shalal in Washington and Koh Gui Qing in New York; Additional reporting by Chris Prentice in New York and Michael Martina in Beijing; Editing by Chizu Nomiyama and Peter Cooney)