Posts Tagged ‘tariffs’

Trump seems worried about falling short on a US-China trade deal. He has good reason to be, according to experts.

February 17, 2019

Trump administration officials have become increasingly pessimistic that Beijing will budge anytime soon

  • The Trump administration said levying tariffs would pressure China to address intellectual-property transfer and other policies.
  • Experts have long seen the second-largest economy as unlikely to budge on those issues.
  • Ahead of a March deadline for trade negotiations, they remain unresolved.
Since igniting a trade war with Beijing last year, the White House has said it would force the world’s second-largest economy to change policies seen as unfair.

Seven months and hundreds of billions of dollars worth of tariffs later, President Donald Trump appears to be bracing for the possibility of that not happening.

china us trade

U.S. Trade Representative Robert Lighthizer, center, listens as Chinese Vice Premier Liu He, right, talks while they line up for a group photo at the Diaoyutai State Guesthouse in Beijing, Friday, Feb. 15, 2019. At left is U.S. Treasury Secretary Steven Mnuchin. AP Photo/Mark Schiefelbein, Pool

“[New York Senator Chuck] Schumer’s gonna stand up and say, ‘Oh, it should have been better,'” he said of a US-China trade deal on Friday in the Rose Garden while declaring a national emergency over border security. “Sadly, I’d probably do the same thing to them.”

After multiple meetings between high-level trade delegations from each country, there has been little evidence China has committed to the structural changes the US seeks. While officials are expected to resume negotiations in Washington next week, observers see slim odds for any meaningful breakthrough.

“The inability of the two sides to make progress in several rounds of negotiations points to a limited deal when it finally happens,” said Derek Scissors, a China expert at the conservative-learning American Enterprise Institute.

China has expressed a willingness to work toward reducing its bilateral trade surplus with the US, offering to increase purchases of American products like soybeans and semiconductors.

But it has denied engaging in practices Washington wants to change, including the forced transfer of American trade secrets. On vows to rein in state support for high-tech and industrial companies, another sticking point, key details remain elusive.

Even Trump administration officials have become increasingly pessimistic that Beijing will budge on those anytime soon, the New York Times reported last month.

There are just over two weeks until a truce between the two sides expires, after which tariffs on $200 billion worth of Chinese imports are set to increase to 25% from 10%. Trump has said he’s open to extending that deadline, potentially punting the dispute into the spring and setting the stage for a prolonged period of protectionism.

Scissors said he expects at least some duties will remain in place through 2020. Others think they could outlast the trade war itself.

“The hard parts have been kicked down the road and one wonders if there is any agreement that both sides would sign,” said Mary Lovely, a trade scholar at the Peterson Institute for International Economics. “It seems likely that existing tariffs will stay in place even if Xi and Trump reach agreement on other issues.”

The White House did not respond to an email requesting comment.

https://www.businessinsider.com/us-china-trade-war-trump-should-be-worried-about-deal-failure-experts-say-2019-2

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Pence chastises EU, rejects Merkel’s call to work with Russia

February 16, 2019

U.S. Vice President Mike Pence rebuked European powers over Iran and Venezuela on Saturday in a renewed attack on Washington’s traditional allies, rejecting a call by Germany’s chancellor to include Russia in global cooperation efforts.

Describing the results of Donald Trump’s presidency as “remarkable” and “extraordinary”, Pence told senior European and Asian officials the EU should follow the United States in quitting the Iran nuclear deal and recognizing the head of Venezuela’s congress, Juan Guaido, as the country’s president.

“America is stronger than ever before and America is leading on the world stage once again,” Pence told officials at the Munich Security Conference, listing what he described as U.S. foreign policy successes from Afghanistan to North Korea.

Addressing an audience that included Trump’s daughter Ivanka, Pence’s speech was the latest attempt by a Trump official to put the president’s “America First” agenda into a coherent policy plan.

European leaders are troubled by Trump’s rhetoric, which they say is erratic and disruptive, citing his decision to pull out of the 2015 Iran nuclear deal as undermining an arms control agreement that prevented Tehran from developing a nuclear bomb.

German Chancellor Angela Merkel speaks during Munich Security Conference

But Pence — who last week during a visit to Poland accused Britain, Germany and France of undermining U.S. sanctions on Iran — repeated his demand that European powers withdraw from the deal.

“The Iranian regime openly advocates another Holocaust and it seeks the means to achieve it,” Pence, who also visited the Nazi concentration camp Auschwitz, told delegates.

“The time has come for our European partners to withdraw from the disastrous Iran nuclear deal and join with us as we bring the economic and diplomatic pressure,” Pence said.

Pence, who used his trip to Europe to push Trump’s policy of favoring sovereign states as opposed to alliances and blocs, took aim at the European Union as a whole, saying “once more the Old World can take a strong stand in support of freedom in the New World” in Venezuela.

“Today we call on the European Union to step forward for freedom and recognize Juan Guaido as the only legitimate president of Venezuela,” he said, calling President Nicolas Maduro a dictator who must step down.

MERKEL’S VIEW

His speech contrasted sharply with German Chancellor Angela Merkel’s robust defense of Germany’s foreign trade relations and ties with Russia, urging global leaders meeting in Munich to work together to tackle the world’s problems.

Speaking before Pence, Merkel questioned whether the U.S. decision to leave the Iran nuclear deal and withdrawal from Syria was the best way to tackle Tehran in the region.

She defended plans for a new natural gas pipeline from Russia to Germany that Pence again criticized.

Trump has accused Germany of being a “captive” of Russia due to its reliance on Russian energy, but Merkel argued:

“If during the Cold War… we imported large amounts of Russian gas, I don’t know why times should be so much worse today that we can say: Russia remains a partner.”

During a question-and-answer session, she added that it would be wrong to exclude Russia politically, but Pence said Washington was “holding Russia accountable” for its 2014 seizure of Ukraine and what the West says are efforts to destabilize it through cyber attacks, disinformation and covert operations.

“Geostrategically, Europe can’t have an interest in cutting off all relations with Russia,” Merkel said.

Trump has also criticized the large trade surplus that Germany, Europe’s biggest economy, has with the United States and has threatened to put tariffs on German cars in return.

“We are proud of our cars and so we should be,” Merkel said, adding, however, that many were built in the United States and exported to China.

“If that is viewed as a security threat to the United States, then we are shocked,” she said, drawing applause from the audience.

Reporting by Paul Carrel and John Irish; Additional reporting by Madeline Chambers; Editing by Angus MacSwan and Helen Popper

Reuters

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Pence rebukes European powers over positions on Iran, Venezuela

Failed trade talks with China point to false promise of ‘winning’ a trade war

February 16, 2019

President Trump kicked off his press conference Friday morning talking about China. Although he didn’t offer much new information about the ongoing trade talks with Beijing, it’s clear that negotiations remain a stalemate.

By Erin Dunne
Commentary

Speaking about negotiations set to resume next week, Trump explained, “We’ve had a negotiation going on for about two days. It’s going extremely well.” Undermining that positive assessment, he added, “Who knows what that means?” only to come back with, “because it only matters if we get it done.”

Image result for Donald Trump, Xi Jinping, al jazeera, mar-a-lago, pictures

Xi Jinping knew how this would go when he went to Mar-a-Lago in April, 2017

Those remarks come amid speculation that Trump might opt to extend the March 1 deadline, set late last year, to work out a deal with Beijing. Given several months of talks between Chinese and American negotiators have made seemingly little progress, it’s unlikely that both sides will have reached an agreement by the end of the month.

But simply giving both sides more time to keep talking isn’t likely to yield substantially different results.

Indeed, Trump and his administration have made clear that what he hopes to achieve in talks with China is nothing short of rewriting the country’s entire economic model by cutting state ties to industry and opening up previously closed sectors to foreign investment. That’s not going to happen, as it would destroy the current political power structure that underpins the Chinese Communist Party. Chinese President Xi Jinping, much like Trump, is not one to willingly bargain away his authority.

For Trump, that means that he’s more likely to have to claim victory on “getting it done” when it comes to a deal with China rather than actually securing significant concessions. He likely knows this, hence the open-ended suggestion that it’s unclear what negotiations “going well” actually means.

In the end, the most likely result is that China will grant mild concessions and Trump will take it as a victory, never mind that such an agreement isn’t likely to be anywhere close to “covering everything, all of the points that people have been talking about for years and said couldn’t be done,” as Trump promised in his press conference.

If that’s going to be the outcome anyway, Trump would do far better to end the trade war with an agreement instead of an extension of negotiations, and with it, continuing tariffs. Then his administration can do the real legwork of targeting China as the Commerce Department has been quietly doing all along.

Trade wars, it turns out, aren’t quite the easy battles that Trump made them out to be.

https://www.washingtonexaminer.com/opinion/failed-trade-talks-with-china-point-to-false-promise-of-winning-a-trade-war

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Pence warns of the ‘threat’ from China’s Huawei

February 16, 2019

U.S. Vice President Mike Pence is urging allies to take seriously “the threat” posed by Chinese telecom giant Huawei as they look for partners to build 5G wireless infrastructure.

Pence said Saturday the U.S. had been “clear with our security partners on the threat posed by Huawei and other Chinese telecom companies.”

He told the Munich Security Conference they “provide Beijing’s vast security apparatus with access to any data that touches their network or equipment (and) we must protect our critical telecom infrastructure.”

He says “America is calling on all our security partners to be vigilant and to reject any enterprise that would compromise the integrity of our communications technology or our national security systems.”

China rejects the U.S. position, saying Washington has provided no evidence Huawei threatens national security.

___

12:25 p.m.

U.S. Vice President Mike Pence is doubling down on his criticism of European nations working to preserve a nuclear deal with Iran, saying they should follow Washington’s lead and withdraw from the agreement.

Speaking Saturday right after Chancellor Angela Merkel defended the 2015 Iran deal, Pence said “the time has come for our European partners to stop undermining sanctions” by continuing to offer economic incentives in exchange for Tehran limiting its nuclear capability.

He says Europe should withdraw from the Iran nuclear deal “and join us as we bring the economic and diplomatic pressure necessary to give the Iranian people, the region and the world the peace, security and freedom they deserve.”

France, Germany and Britain, as well as the European Union, Russia and China, have been struggling to preserve the deal since the U.S. pulled out last year.

___

12:10 p.m.

German Chancellor Angela Merkel says U.S. authorities appear to have concluded that European cars are a threat to national security.

Merkel said at the Munich Security Conference that Germany is “proud of our cars, and we’re allowed to be,” and many of them are built in the U.S.

The European Union and the U.S. have been trying to ratchet down trade tensions in recent months and Merkel says she has “great hope” in the negotiations. But she added: “It is not entirely easy for me as German chancellor to read that apparently — I don’t have it in writing yet — the American Commerce Department says German, European cars are a threat to national security.”

Chancellor Merkel at CDU congress, 7 Dec 18

She noted that German automaker BMW’s biggest plant is in South Carolina “and if these cars … are suddenly a threat to the United States’ national security, that startles us.”

12 noon

Chancellor Angela Merkel is defending the development of the joint German-Russian Nord Stream 2 pipeline, dismissing American concerns it will weaken Europe’s strategic position and assuring Ukraine it won’t get cut off from Russian fuel.

Merkel on Saturday told Ukrainian President Petro Poroshenko at the Munich Security Conference his country would continue to be a transit country for Russian gas even after the Baltic pipeline is complete.

On security concerns, she says the question is “how dependent are we on Russian gas, and that has nothing to do with the delivery.”

She says Europe also has enough terminals to receive more LNG fuel from the U.S., has its own natural gas and has other options, too.

She says “there’s nothing that speaks against getting gas from the United States, but to exclude Russia is the wrong strategic signal.”

___

11:50 a.m.

German Chancellor Angela Merkel is defending European powers’ decision to stand by the Iran nuclear deal, describing it as an “anchor” allowing the West to exert pressure.

U.S. Vice President Mike Pence accused Germany, France and Britain of trying to “break” American sanctions on Iran and called on them to follow Washington in pulling out of the nuclear deal.

Merkel told the Munich Security Conference Saturday the split over Iran “depresses me very much,” but downplayed the substance of the differences.

She said: “I see the ballistic missile program, I see Iran in Yemen and above all I see Iran in Syria.”

But “the only question that stands between us on this issue is, do we help our common cause, our common aim of containing the damaging or difficult development of Iran, by withdrawing from the one remaining agreement? Or do we help it more by keeping the small anchor we have in order maybe to exert pressure in other areas?”

___

11:45 a.m.

Egypt’s president has called on Western countries to boost efforts at tackling extremist ideology in online media and mosques.

Speaking at the Munich Security Conference Saturday, Abdel-Fattah el-Sissi says countries must “tackle websites that are inciting hatred and spreading extremist and terrorist narratives among communities in the Islamic world and in the West.”

He also said authorities should “be very mindful of what is being promoted at houses of worship,” adding that extremists should not be allowed to preach. He underlined his efforts in Egypt to control the sermons in mosques.

Egypt has wide-ranging restrictions on free speech.

El-Sissi also mentioned that in the terrorism context, the failure to reach a fair and final settlement in the Israeli-Palestinian conflict represents the main source of instability in the Middle East.

___

11:15 a.m.

German Chancellor Angela Merkel is calling on China to join international disarmament negotiations after the collapse of a Cold War-era treaty on nuclear weapons in Europe.

The U.S. earlier this month announced that it was pulling out of the 1987 Intermediate-Range Nuclear Forces treaty, accusing Russia of violating it. Moscow followed suit, strongly denying any breaches. The U.S. administration also worried that the pact was an obstacle to efforts to counter intermediate-range missiles deployed by China.

Merkel told the Munich Security Conference Saturday that the U.S. withdrawal was “inevitable” because of Russian violations. But she noted the end of a treaty conceived “essentially for Europe” leaves Europe trying to secure future disarmament to protect its own interests.

Associated Press

Mike Pompeo and Federica Mogherini (Reuters/O. Hoslet)

Pompeo, Mogherini hold tense meeting after Iran rebuke from US

https://www.dw.com/en/pompeo-mogherini-hold-tense-meeting-after-iran-rebuke-from-us/a-47529321

German cars pose no security risk to United States, Merkel says

February 16, 2019

German cars do not pose a security threat to the United States, Chancellor Angela Merkel said on Saturday as she appealed for global cooperation on a range of issues from dealing with Iran to preventing another migrant crisis.

Image result for Munich Security Conference, Merkel, Pictures

“We are proud of our cars and so we should be,” Merkel said, adding, however, that many were built in the United States and exported to China. “If that is viewed as a security threat to the United States, then we are shocked,” she told the Munich Security Conference to applause from the audience.

Reporting by Paul Carrel; Writing by Madeline Chambers

Reuters

New Tariffs Threaten to Boost Prices of Imported Cars and Parts

February 15, 2019

Commerce Report to Trump Could Recommend 20% Levies

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American car buyers are facing sticker shock as President Trump weighs new tariffs on imported vehicles and auto parts.

The Commerce Department is concluding its investigation into whether imported cars and parts pose a national-security threat under Section 232 of U.S. trade law, with a deadline of Sunday to submit its findings to the president.

Mr. Trump has already voiced support for levies of 20%. If the tariffs are imposed, then prices of cars from Japan, Germany, South Korea would rise sharply, assuming those countries don’t receive exemptions.

But buyers of domestically produced cars could be shelling out more too if tariffs are imposed on components, since between 40% and 50% of the average U.S.-built vehicle is assembled with foreign-made components, the Center for Automotive Research estimates.

“These tariffs are a tax on U.S. companies, and ultimately they will be an additional expense on the U.S. consumer,” said Ann Wilson, senior vice president at the Motor and Equipment Manufacturers Association, which represents the auto-parts industry.

Mr. Trump has touted previous tariffs his administration has developed under a national-security law—the ones on steel and aluminum imports—as a way to protect vital American industries from unfair foreign competition, while simultaneously putting pressure on partner countries to open up their markets to more American goods.

Yet in the case of the auto-industry tariffs, there has been virtually no backing from the domestic industry, although the United Auto Workers has voiced cautious support.

“In our district there have been no fans of any kind of a tariff,” said Rep. Jackie Walorski, a Republican who represents an Indiana congressional district that produces auto parts as well as recreational vehicles—which she fears could face retaliation in a vehicular trade war.

Detroit auto makers, foreign brands operating in the U.S. and auto-parts suppliers worry any duties would disrupt their increasingly international supply chains or lead to retaliatory tariffs on their exports. Car assemblers and part makers are already paying more for steel and aluminum due to tariffs. Dealers are worried about declining sales.

“There’s a reason why we’ve seen a real slowdown in investment activity,” said Kristin Dziczek, an economist at the industry-backed Center for Automotive Research. “People are waiting to see where the chips fall.”

It isn’t clear whether the Commerce Department’s submission of the report will dispel much uncertainty.

Industry officials are not expecting the report to be made public initially, and the department will likely recommend several possible tools for the president, including big tariffs on imported cars and potential trade barriers on parts used in autonomous and electric vehicles, they said.

The Commerce Department declined to comment on the report, which gives Mr. Trump 90 days to announce tariffs or other barriers. When Mr. Trump imposed similar steel and aluminum tariffs, certain countries were given temporary exemptions during trade negotiations, but the European Union, Canada and Mexico were eventually subjected to the duties, triggering retaliation.

Ms. Wilson said the report has the potential of stirring widespread opposition to Mr. Trump’s trade policies.

“Those policy makers who have not really considered the impacts of the tariffs really need to think about the impact it will have on suppliers in their states—and it’s going to be a negative impact,” she said.

Republicans are among those urging Mr. Trump’s trade team to leave autos alone.

“I don’t believe that minivans from Canada or other allies are a threat to our national security, so I hope the administration takes a step back and reconsiders any auto tariffs,” said Sen. Rob Portman, a Republican from Ohio.

Mr. Trump, however, credits the threat of car tariffs with bringing the EU and Japan to the negotiating table for possible trade deals with the Trump administration.

“If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S.,” Mr. Trump tweeted last year, referring to the EU.

Mr. Trump and European Commission President Jean-Claude Juncker agreed last year to work on an agreement to cut tariffs on industrial goods and boost purchases of American soybeans and natural gas. Both sides agreed to avoid imposing additional tariffs on each other during active negotiations, with each side prepared to terminate talks in the case of new tariffs on auto-industry or other products.

“If that commitment were not respected, both the talks and the process would be seriously compromised,” EU Ambassador David O’Sullivan said. “We wait with interest to see what the report will say and how the president will react.”

The Trump administration complains that U.S. cars face a 10% tariff in Europe, while European cars have a tariff of only 2.5% when entering the U.S., according to complicated agreements made through the World Trade Organization.

Besides with the EU, Mr. Trump also paved the way for bilateral trade talks this year with Japan, which sent $40 billion in passenger cars to the U.S. last year.

Former U.S. trade officials say Mr. Trump is seeking to replicate the concessions that the Obama administration obtained from Japan when it negotiated the 12-nation Trans-Pacific Partnership agreement—which Mr. Trump exited before it was ratified. Japanese Prime Minister Shinzo Abe said last year that Mr. Trump has promised not to impose tariffs while talks are under way.

Write to William Mauldin at william.mauldin@wsj.com and Mike Colias at Mike.Colias@wsj.com

https://www.wsj.com/articles/new-tariffs-threaten-to-boost-prices-of-imported-cars-and-parts-11550236094

‘Much work remains’ on China trade talks, says White House

February 15, 2019

The White House said Friday that the U.S. and China aren’t close yet to an agreement to ends their costly trade war, which could escalate further if there’s no deal by March 1.

Image result for Liu He, bloomberg, pictures

Liu He    Photographer: Qilai Shen/Bloomberg

White House press secretary Sarah Sanders said after high level meetings this week, there was “progress,” but no deal in sight.

“These detailed and intensive discussions led to progress between the two parties,” she said. “Much work remains, however.”

The U.S. has imposed tariffs on $250 billion worth of Chinese goods to retaliate against China’s failure to respect U.S. intellectual property rights, and its policy of forced technology transfer.

China has retaliated with its own tariffs and other restrictions on trade, and the U.S. has said it would hit all of China’s exports with tariffs if there’s no deal by March 1.

While there have been rumblings that the U.S. would extend that deadline, Sanders’ statement made no mention of that option, and said the U.S. is for now sticking to the deadline.

“Both sides will continue working on all outstanding issues in advance of the March 1, 2019, deadline for an increase in the 10 percent tariff on certain imported Chinese goods,” she said.

The U.S. and China will meet against in Washington next week. This week’s meetings were led by U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He.

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Xi Hails Important Progress, Says Trade Talks to Resume in U.S.

February 15, 2019
Lighthizer says both sides made headway on difficult issues
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The senior-level talks are expected to conclude on Friday [Mark Schiefelbein/Pool via Reuters]

The senior-level talks conclude on Friday and will move to the US [Mark Schiefelbein/Pool via Reuters]

Chinese President Xi Jinping (centre) meets the trade negotiators in Beijing on Friday. Photo: Xinhua

President Xi Jinping said U.S.-China trade talks would continue next week in Washington, as the two sides race to reach a deal that would avert a tariff increase on Chinese goods after March 1.

“Negotiations between both sides have achieved important progress in another step,” Xi said after a round of trade talks wrapped up in Beijing, according to China’s Xinhua News Agency. “Next week, both sides are going to meet in Washington. I hope you keep up the good work, and push for a mutually-benefiting and win-win agreement.”

Xi said he values the “good working relationship” with President Donald Trump very much, and is willing to keep in touch with him in various ways. He added that China was “willing to solve the bilateral economic disputes and frictions through cooperation, and push for an agreement that both sides can accept. But cooperation has principles.”

The Chinese side added that they “reached consensus in principle on major issues,” without providing further details, according to Xinhua.

The U.S. echoed the sentiment, saying there had been progress, but that work remained, according to an emailed statement from the White House. The two sides agreed that commitments reached would be stated in a memorandum of understanding, according to the statement.

Treasury Secretary Steven Mnuchin sounded a positive note on Friday, saying he and U.S. Trade Representative Robert Lighthizer held “productive meetings” with China’s Vice Premier Liu He. They both also met Xi later in the day.

Steven Mnuchin

@stevenmnuchin1

Productive meetings with China’s Vice Premier Liu He and @USTradeRep Amb. Lighthizer.

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“We feel we have made headway on very, very important and difficult issues,” Lighthizer said, according to the Associated Press. “We have additional work we have to do but we are hopeful.”

Across the Negotiating Table: A Who’s Who of China’s Trade Team

The two sides remained far apart this week on structural reforms to China’s economy that the U.S. has requested, according to three U.S. and Chinese officials who asked not to be identified because the talks were private. They said it would likely take a meeting between Xi and Trump to seal a deal.

The U.S. and China were scrambling on Friday to produce a memorandum of understanding that would pave the way for a meeting between the two presidents, the Financial Times reported earlier, citing people briefed on the negotiations.

The U.S. has also not relented on demands for China to dial back government subsidies for state-owned enterprises and improve corporate governance, one of the people said, an extremely sensitive issue that is seen as a non-starter for Chinese leaders.

READ MORE: U.S.-China Trade Teams Said to Be Far Apart on Reform Demands

The uncertainty has weighed on investors, with Asian stocks retreating from the highest levels since October following a dip in U.S. equities. Both sides have an incentive to strike a deal: Trump has repeatedly linked market gains to his administration’s policies, while Bloomberg Economics estimatesChina would avoid a 0.3 percent drag on 2019 gross domestic product if the trade truce holds.

Trump earlier this week said he was open to delaying the deadline to more than double tariffs on $200 billion of Chinese goods if the two countries were close to a deal that addresses deep structural changes to China’s economic and trade policies. Bloomberg News reported late Wednesday that he’s considering pushing back the deadline by 60 days.

Asked Thursday if the Trump administration was considering extending the deadline for tariff increases, White House economic adviser Larry Kudlow said no decision has been made.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin Begin Trade Talks with China

Steven Mnuchin leaves a hotel ahead of trade talks in Beijing on Feb. 13.

Photographer: Qilai Shen/Bloomberg

Negotiators in Beijing “are soldiering on” and the “vibe” is good, Kudlow said on Fox News, adding that he was briefed by U.S. officials earlier Thursday. “They are going to be meeting with President Xi tomorrow, which is a very good sign. They are moving through all of the issues. They are getting the job done.”

Kudlow later told reporters at the White House that he’s “cautiously optimistic” on the outcome of the talks with China.

A meeting date between Trump and Xi has not been set and it is unlikely the pair can meet before the March 1 deadline.

White House adviser Kellyanne Conway said on Tuesday that Trump wants to meet Xi “very soon.”

https://www.bloomberg.com/news/articles/2019-02-15/u-s-china-talks-to-continue-next-week-in-washington-xi-says

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Has China Outsmarted Trump — U.S.-China Trade Talks “Going Nowhere Unless China Makes A Move”

February 15, 2019

Everyone is afraid to say “China is Winning.” — It’s getting harder to tell where the trade war stops and the tech war begins.

President Trump welcomed President Xi at his Mar-a-Lago estate in Florida on Thursday [Carlos Barria/Reuters]
Donald Trump and Xi Jinping at Mar-a-Lago, April 2017

As American negotiators arrived in Beijing this week for the latest round of trade talks, U.S. Secretary of State Mike Pompeo was in Hungary pushing the case against Huawei. The U.S. has already warned allies not to use the Chinese company’s communications gear, alleging it could facilitate spying. Pompeo on this trip hinted countries face a U.S.-or-China choice when it comes to next generation telecom networks.

Huawei has come to embody this growing rivalry. Its role in setting 5G wireless standards makes it a lightning rod. While its chief financial officer, who’s also the daughter of its founder, is out on bail in Vancouver fighting extradition to the U.S., countries from Japan to Canada are mulling bans on Huawei equipment. But in China, its market share is growing.

Huawei Under Fire
Data: Bloomberg reporting, local media

It’s not just Huawei. European Union member states began considering retaliation against China for cyberattacks this week. Those deliberations are linked to U.S. indictments unveiled in December accusing Chinese officials of a decade-long espionage campaign.

And in Washington, President Donald Trump signed an executive order prioritizing artificial intelligence in U.S. government research spending. Guess who America’s biggest competitor in AI is?

Technology is set to be a source of U.S.-China tensions for some time to come. It’ll become even more relentless than trade if Chinese agreements to buy massive amounts of American agriculture and energy are enough to secure a deal that kicks issues of intellectual property and technology transfer down the road.

Looming Deadline

U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He continued trade negotiations in Beijing this week. On the horizon is that March 1 deadline, when the trade truce ends and U.S. tariffs on Chinese goods could rise to 25 percent. And while talks in Beijing were ongoing as of this newsletter’s publication, it appeared increasingly likely the deadline would be extended by 60 days, even though the two sides have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested.

Action Now

Elon Musk isn’t waiting to see if higher tariffs can be avoided. Tesla has loaded at least three cargo ships full of electric cars to be sent to China before the end of February. As part of the trade truce struck in December, China rolled back 25 percent retaliatory tariffs on U.S. cars, which could return without a deal. How Chinese demand for Tesla cars would hold up if the trade war intensified is another question.

relates to Next China: Blurring the Lines
Tesla Model 3 cars sit in a parking lot at the Port Of San Francisco.
Photographer: David Paul Morris/Bloomberg

Picture Unclear

China’s economy is slowing. By how much has been harder to decipher. Corporate earnings, as one indicator, have been mixed. AppleNvidia and Caterpillar are among those that have cautioned of softness in China, along with hundreds of Chinese firms. But companies such as LVMHAlibaba and Toyota have also reported healthy growth. And while overall spending during the Chinese New Year holiday slowed, it still grew 8.5 percent from a year ago to $149 billion. Macau, the only part of China where gambling is legal, also saw a surge in visitors during that period.

Bad Debt

Don’t forget debt when counting up China’s challenges. Much of last year’s slowdown was caused by a campaign to cut leverage, which by the start of 2018 had exceeded 250 percent of gross domestic product. The tighter financial conditions that resulted left many firms in a liquidity crunch. The latest example is China Minsheng Investment Group.

The company, which once dreamed of being China’s JPMorgan Chase, missed a bond payment, had assets frozen and struggled to secure financing. Though by the end of the week it was able to make the overdue payment as Chinese media reported that authorities had stepped in to help.

Feature Film

Image result for Wandering Earth, Fan Bingbing

And finally, there was some good news this week for China’s film industry, which suffered mightily in 2018. The misfortune featured revelations that the country’s highest-paid movie star, the actress Fan Bingbing, had underpaid more than $100 million in taxes. The ensuing clean-up soon embroiled others and depressed productions; sales also slowed.

Image result for Wandering Earth, Fan Bingbing

But now there’s a ray of hope. A new movie, “Wandering Earth,” is capturing imaginations around the country and setting box-office records along the way. The plot? In a post-apocalyptic future, it’s up to Chinese scientists to save the world.

Out of This Solar System

U.S.-China Trade Talks Set to Wrap Up With Few Signs of Progress

February 15, 2019
  • Most of deal-making left for Trump, Xi, people familiar say
  • Trump said to consider 60-day extension for China tariffs

High-level trade talks between the U.S. and China were set to wind up Friday in Beijing, with time running out to reach an agreement that would avert an increase in American tariffs on Chinese goods by March 1.

Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer didn’t comment to reporters as they headed out on Friday morning for a final day of talks of talks with counterparts including Chinese Vice Premier Liu He. They are also expected to meet Chinese President Xi Jinping.

Across the Negotiating Table: A Who’s Who of China’s Trade Team

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin Begin Trade Talks with China

Robert Lighthizer arrives ahead of trade talks in Beijing on Feb. 14.

Photographer: Qilai Shen/Bloomberg

In closed-door sessions this week, the two sides have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested, according to three U.S. and Chinese officials who asked not to be identified because the talks were private. They said it would likely take a meeting between Xi and President Donald Trump to seal a deal.

The U.S. has also not relented on demands for China to dial back government subsidies for state-owned enterprises and improve corporate governance, one of the people said, an extremely sensitive issue that is seen as a non-starter for Chinese leaders.

READ MORE: U.S.-China Trade Teams Said to Be Far Apart on Reform Demands

The uncertainty has weighed on investors, with Asian stocks retreating from the highest levels since October following a dip in U.S. equities. Both sides have an incentive to strike a deal: Trump has repeatedly linked market gains to his administration’s policies, while Bloomberg Economics estimatesChina would avoid a 0.3 percent drag on 2019 gross domestic product if the trade truce holds.

Trump earlier this week said he was open to delaying the deadline to more than double tariffs on $200 billion of Chinese goods if the two countries were close to a deal that addresses deep structural changes to China’s economic and trade policies. Bloomberg News reported late Wednesday that he’s considering pushing back the deadline by 60 days.

Asked Thursday if the Trump administration was considering extending the deadline for tariff increases, White House economic adviser Larry Kudlow said no decision has been made.

Negotiators in Beijing “are soldiering on” and the “vibe” is good, Kudlow said on Fox News, adding that he was briefed by U.S. officials earlier Thursday. “They are going to be meeting with President Xi tomorrow, which is a very good sign. They are moving through all of the issues. They are getting the job done.”

Kudlow later told reporters at the White House that he’s “cautiously optimistic” on the outcome of the talks with China.

A meeting date between Trump and Xi has not been set and it is unlikely the pair can meet before the March 1 deadline.

White House adviser Kellyanne Conway said on Tuesday that Trump wants to meet Xi “very soon.”

https://www.bloomberg.com/news/articles/2019-02-15/u-s-china-trade-talks-set-to-wrap-up-with-few-signs-of-progress