Last week’s US-China negotiations ended with practically no progress, but just confirmation that the tariff war will drag on. New round of tariffs already took effect on Friday and paperwork for tariffs on USD 325B in Chinese goods has started. For now, no new round of talks is scheduled. China’s retaliations are awaited and could be announced any time soon.
Chines Vice Premier Liu He told reporters on Friday that the “negotiations have not broken down”. He also tried to talked down the situation and said mall setbacks are normal and inevitable during the negotiations of both countries. Looking forward, we are still cautiously optimistic” . Yet, he added that “right now, both sides have reached mutual understanding in many things, but frankly speaking, there are also differences.”
Liu emphasized “differences are significant issues of principle,” and “we absolutely cannot make concessions on such issues of principle.” One of the issues is over the current tariffs. Liu told Phoenix television in Hong Kong that if both sides wanted to reach an agreement, then all tariffs must be eliminated. Also, both sides have different opinions on the volume of additional purchase of US goods from China. As noted by a commentary by state news agency Xinhua, any purchases should be “in line with reality”. The biggest issue, though, is likely on the text regarding law changes regarding core issues like IP theft, which China sees as intrusion of sovereignty. Liu said that “every nation has its dignity, so the text ought to be balanced,”
Trump continued to sound hard line on China with his tweets and said China was “beaten so badly” in recent negotiations and they may as well “wait around for next election” to see if they can “get lucky and have a Democratic win”. But Trump also said “the only problem is that they know I am going to win… and the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!”. Trump typically didn’t elaborate the logic link between China knowing he will win the second term yet, they’re waiting for next election. That’s no point in dragging on if a Trump win is certain.
Fed Rosengren: If Trump’s trade war causes slowdown, Fed has the tool to deal with it
Boston Fed President Eric Rosengren said Fed is well prepared to react if Trump’s trade war with China causes slowdown in the economy. He said, “if the impact of the tariffs – and whatever financial market reaction to those tariffs is – causes more of a slowdown, then we do have the tools available to us, including lower interest rates”.
But for now, “it’s hard for the Fed to react until we have better information, so in terms of us viewing our policies as being patient, I’m not sure this alters our view of that until we have a better sense of whether this is going to have more long-lasting effects,” Rosengren added.
Separately, Minneapolis Fed President Neel Kashkari said the “relative to China, the US is in a very strong position.” “”Not only is our economy bigger, our economy is much less sensitive to trade. Trade is important to the U.S. economy, but it’s much more important to the Chinese economy, just as a share of its economy,” he added.
Hence, Kashkari said “if there’s a tit-for-tat strategy, and I’m not advocating it, but a tit-for-tat strategy would seem to lean toward the U.S. strength rather than the China strength.”