China Trade: Both sides agree to meet in Beijing for talks

Clay Curtis
May 11, 2019

"We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China".

The U.S. -Chinese trade negotiations wrapped up before noon and the Chinese were preparing to leave.

Deborah Elms, executive director at the Asian Trade Centre, said: "It's going to be a big shock to the economy".

The graphic below, provided by Statista, illustrates the escalation of trade tariffs between the US and China.

After days of repeated threats, U.S. officials on Friday noon (Beijing Time) increased an existing 10 percent tariff on $200 billion in Chinese goods to 25 percent, breaking a truce reached by the leaders of the two countries in December 2018 and highlighting the unreliable and unpredictable nature of the USA administration.

Recent developments in U.S.

US Treasury Secretary Steven Mnuchin and Lighthizer met for about two hours with Liu on Friday and then headed for the White House to brief Trump, who had said he was in no hurry to reach a deal, arguing the United States was negotiating from a position of strength.

Analysts warned that the mounting trade dispute between the world's two largest economies could trigger a global recession. Bloomberg Economics calculates the new increase will raise the drag on Chinese growth to 0.9 percentage point from 0.5 percentage point. "U.S. consumers will continue to buy stuff from China because there are not alternative sources for most of it". US President Donald Trump also ordered tariffs to be raised on all remaining US imports from China, which are valued at around $300 billion. Though this drives up the price of Chinese products, which Trump contends is good for USA competitors, it also pushes up costs for US companies and, ultimately, consumers.

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Donald Trump's latest tariff hikes on Chinese goods took effect Friday, May 10, 2019. Farmers are frustrated by the trade war.

In a Twitter post, Trump said the two sides held "candid and constructive conversations", adding that discussions would continue in the future.

Though talks are set to resume Friday, some close observers said they were not hopeful for any meaningful breakthroughs. It was also unclear whether China had resolved the internal debates that had led to last week's rescinding of prior commitments to enshrine reforms agreed in Chinese law.

After the Chinese left town, the USA announced plans to target the $300 billion in Chinese goods that don't already face tariffs. Through late last week, Trump administration officials were suggesting that negotiators were making steady progress.

"Looking forward, we are still cautiously optimistic", Liu said. "Our alternative is an excellent one, it's an alternative I've spoken about for years".

Media captionWill a trade deal end US-China rivalry? "We are not seeing the same risk of reaction that we have seen in previous sessions". But U.S. hog farmers were quick to support the idea of additional government purchases. But it has also sent its own signals that a deal could take time.

"Better for China to play the role of conciliatory statesman than angry retaliator". The move rasied tariffs from 10% to 25% on a range of consumer products, including cell phone, computers and toys.

American companies disagree with tariff hikes but "are supportive of the idea in the short term if it helps us get to a strong, enforceable, long-term agreement that addresses structural issues", said Greg Gilligan, the deputy chairman of the American Chamber of Commerce in China.

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