United States and China willing to engage in discussions
Headline: Trade war easing signs emerge as U.S. and China consider negotiations
It seems like the trade war between the global economic heavyweights is heading towards a thaw. China has hinted at potential talks, following a U.S. approach towards resolution, but they've made it clear: Washington needs to rectify "erroneous" practices and scrap unilateral tariffs. The U.S. must show genuine intent in negotiations, lest they try to manipulate negotiations for coercive purposes.
Donald Trump imposed punishing tariffs on major trade partners after his 2021 re-election, and tensions with China reached an all-time high. Currently, the U.S. imposes a staggering 145% tariff on Chinese imports, with China retaliating with a 125% tariff. At such punitive levels, trade is no longer viable for countless businesses, making these tariffs untenable. On the other hand, these tariffs could disrupt supply chains and hamper growth on both sides, keeping both economies in a stalemate until a resolution is found.
Trump recently hinted at ongoing talks with China, but the Chinese leadership has consistently denied this. The People's Republic has expressed frustration about the tariffs on numerous occasions. Trump's strategy aims to mitigate the U.S. trade deficit and motivate multinational corporations to invest more in the U.S. Apart from trade deficit reduction, Trump has also tied tariffs to other political objectives, such as fortifying border protection from Canada and Mexico to combat drug trafficking and illegal immigration.
Stock Market Reacts Positively
Recent indications of de-escalation have been observed in the past few weeks. Reports suggest that the Chinese government is drafting a list of U.S.-made goods that would be exempt from the 125% tariffs, including certain medicines, microchips, and aircraft engines. U.S. officials like Treasury Secretary Steven Mnuchin and White House economic advisor Larry Kudlow have expressed optimism about progress. Trump himself has gone on record saying he sees a "very good chance" of reaching a deal with China. U.S. Secretary of State Mike Pompeo is expected to meet with China soon to discuss all aspects of the issue.
Positive vibes from potential negotiations boosted the DAX index in Frankfurt, with the German benchmark shooting up by 1.5% to 22,826 points. However, international bank Standard Chartered has raised concerns about the potential negative impact of higher tariffs on the quality of loans. Bank CEO Bill Winters notes that the imposition of trade tariffs has increased global economic and geopolitical complexity. Interestingly, Apple reaped the benefits from early smartphone sales due to U.S. tariffs, posting a surprisingly strong quarterly result.
(Originally reported by Reuters bureau in Beijing, written by Christian Krämer and Alexandra Falk, edited by Elke Ahlswede. For further questions, please reach out to our newsroom in Berlin under [email protected] (for politics and economics) or in Frankfurt under [email protected] (for companies and markets).)
Insight: The potential negotiation frameworks include tariff reductions, market access, and tech controls. Key concessions in play could involve restoring tariff waivers, relieving "Entity List" restrictions, and reducing joint-venture requirements in certain sectors. However, stubborn issues like subsidies, intellectual property, and Taiwan remain sticking points. Both nations aim to prevent "friend-shoring" damage to the WTO architecture while managing their respective strategies. This tentative detente remains vulnerable, with progress likely confined to non-strategic sectors while tech/tariff battles are fought in crucial industries.
- Tariff reductions and market access are potential discussion points between the U.S. and China, as they consider negotiations to end the trade war.
- The Chinese government is reportedly drafting a list of U.S.-made goods that would be exempt from the 125% tariffs, including medicines, microchips, and aircraft engines.
- Donald Trump, in a positive tone, has suggested a "very good chance" of reaching a deal with China, but stubborn issues like subsidies, intellectual property, and Taiwan remain sticking points.
- The People's Republic has warned that Washington needs to rectify "erroneous" practices and scrap unilateral tariffs for any negotiations to be sincere and productive, in the context of general news and politics.
