World markets slump amid US-China trade tensions

Daniel Fowler
May 8, 2019

Mr. Lighthizer [Trump's top trade adviser] and Mr. Mnuchin [the Treasury Secretary] said on Monday that the Chinese delegation had not canceled travel plans to come to Washington on Thursday and Friday for negotiations.

"There's a lot of feeling in ag country that we're being used as pawns in this whole business", Roberts said, but added: "We will benefit tremendously if we get a good deal, so we're hanging in there with the president".

The possibility that the trade dispute could escalate represents a marked shift from just a few weeks ago, when talks between the USA and China appeared to be on track for an agreement.

Adding to the gloom, China reported Wednesday that its exports sank 2.7% in April from a year earlier to $193.5 billion, a reversal from March's 14.2% growth and well below private sector forecasts of growth in the low single digits. Exports to the United States, China's biggest foreign market, were down 13 per cent at $31.4 billion. Now those groups Trump vowed to help are sounding the alarm about the impact of Trump's protectionist measures on imports from China and other trading partners.

The primary concern isn't actually the increased tariffs-investors seem to be more anxious that China will cancel its talks with the USA, leading to increased tension between the countries.

CNN correspondent Matt Rivers said China is blinking in the game of "last-minute brinksmanship" on the U.S.

Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, said: "People are starting to price in the fact that trade negotiations may fall apart or at least extend".

"It undermines the core architecture of the deal", the person said, adding that not codifying the concessions would make it hard to verify and enforce China's compliance.

Iran to announce partial withdrawal from nuclear deal
The paper said today Iran may install advanced centrifuges as its Nananz facility and start enrichment at the Fordo facility. While visiting Finland, US Secretary of State Mike Pompeo said Iran has "threatened many things over the last two years".

"Both the premier of China and the president of the United States want to come across that they prevailed and didn't give in", he said. Additional tariffs are set to take effect on Friday if a trade agreement is not reached by then.

Washington also wants more access to China's vast markets for USA businesses, curbs on industrial subsidies and increased purchases of American products. A fair deal that could be verified and enforced ultimately would be best for the US economy.

China would make its retaliatory tariffs effective one minute after the USA, if the decision to add an extra 25 per cent in duties on $200 billion of Chinese imports comes into force, the people said, who asked not to be named as the matter isn't public.

Meanwhile, the Australian dollar was buying 70.1 U.S. cents.

In particular, observers were paying close attention to whether Beijing would scrap Liu's visit to the U.S. "Sorry, we're not going to be doing that anymore!" he tweeted.

While the growth gloom pressured commodity markets, oil prices were bolstered by the surge in Chinese crude imports as well as USA sanctions on crude exporters Iran and Venezuela.

Sources familiar with the negotiations said the U.S. is frustrated as China appears to be backpedalling on earlier commitments on forced technology transfers. I think there was some thought here in Beijing - they were surprised at what the president said.

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