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China and US want talks to ease trade tensions

China and US want talks to ease trade tensions

China and the US are reportedly having private conversations about restarting talks in an attempt to prevent a full-scale trade war.

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By Meili Chen 02.08.2018

China and the US are reportedly having private conversations about restarting talks in an attempt to prevent a full-scale trade war. The latest wave of US tariffs could arrive by midweek, but there appears to be a growing desire for both parties to come to the table to try and broker a deal that could ease tensions.

Representatives close to China Vice Premier Liu He and United States Treasury Secretary Steve Mnuchin are apparently talking behind the scenes with the aim of coming together again to restart negotiations. This is according to two sources close to the trade effort.

The exact timescale for any talks is unknown just yet. A back-and-forth on the issues needs discussion, as does a format for each side to posit proposals. All that is in place right now is an acknowledgement in both camps that more talks are necessary on trade.

The conflict has continued to rumble on since the first round of tariffs were introduced, with neither side willing to back down or come to the table to take part in negotiations to resolve the issue. Another anonymous source claimed that high-level US talks on how to proceed with trade and China will take place sometime later this week.

US Trade Representative Robert Lighthizer could pose a challenge to Mnuchin’s efforts, as he has jurisdiction over an investigation that was a primary factor in the Trump administration’s decision to implement tariffs. The US’ 301 case concluded that China was using its trade position to steal American tech and that tariffs were the best course of action to mitigate risks and offset damages.

A new wave of US tariffs is on the horizon and could come into play by Wednesday, with USD $16bn of Chinese imports being the target. Beijing has said on several occasions that it does not want a full-blown trade war but will not back down in the face of provocation from the US, so it is no surprise that officials have vowed to return the next tariffs in kind on US products.

China’s state-run news agency, Xinhua, said on Tuesday that geopolitical tensions and other risks will not prevent the country from hitting its economic growth target for the year. The world’s second-largest economy is already facing up to the impact of a multi-year deleveraging initiative, which has put a spanner in the works for planned government projects and increased corporate borrowing costs.

Xinhua noted that there are “significant changes in the external environment” that could pose a problem in the short term but was bullish about China’s ability to battle against these risks and challenges and maintain confidence. It added that “stabilizing employment, finance, foreign trade and investment” would be key during the next six months. 

Economic growth cooled slightly during the second quarter of 2018, but the 6.7% figure was still ahead of the 6.5% growth target for the year. The trade row with Washington is a particular area of concern, but a slowing domestic property market and a downturn in outbound shipments have also put a crimp on the economic outlook.

China’s cabinet is eager to offset some of these external uncertainties, and it pledged to adopt a more vigorous fiscal policy to support economic growth. There will also be a boost in infrastructure investment, lower corporate costs and greater support for innovations. According to a recent Reuters report, borrowing curbs on local governments will soon ease as well.

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