The US-China trade talks in Washington ended on Friday with what looks like a deadlock. The two sides both sent signals of cautious optimism but the underlying development suggests a bigger crisis in the negotiations.
The trade teams have agreed to meet again in Beijing but not when. The US has given China a month to make concessions or otherwise face tariffs on all imports. In this case the tariffs could come into force in early August.
We see an increasing risk that the trade talks drag out into H2 and that it will get worse before it gets better, see also China Weekly Letter - Chicken game is back on , 10 May 2019.
Signals of cautious optimism after talks in Washington...
First the cautious optimism: US Treasury Secretary Stephen Mnuchin saying talks had been 'constructive' and China's top negotiator Vice Premier Liu He said it went 'fairly well'. Trump tweeted later that the conversations had been 'candid and constructive' and that 'the relationship between President Xi and myself remains a very strong one, and conversations into the future will continue. In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations'. The moderately positive signals led to a rebound in equity markets and strengthened the belief that maybe things are not so bad after all.
... but actual developments reveal a bigger crisis in the talks
However, the actual developments suggest something different and that the two sides were trying to play down the real difficulty of the situation in order not to stir up too much concern. Here is what we know happened during the two days based on media reports.
The talks on Thursday were very short . They lasted for only one and a half hours and sources close to the negotiations said there was little to no movement. The sources said that China's top negotiator Liu He had delivered the message that China was not willing to give the concessions the US wanted.
On Friday 12:01am US tariffs come into force and China immediately vows retaliation.
On Friday morning Trump launched a series of tweets among other things saying that the US is in no rush to make a deal and that the US economy will speed up while China's economy will greatly slow down. He also stated the 'the process has begun to place additional 25% on the remaining USD325 billion dollars' (for some reason, the tweets were removed for a short period and then put back on).
Trade talks continued on Friday but again lasted for only one and a half hours . The Chinese trade team leaves on a flight out of Washington at 4pm. The two sides agree to keep negotiating and meet in Beijing but with no set date.
Supposedly the US gives China a month to make a deal or they will start the process of taxing the rest of imports from China, see Bloomberg , 10 May.
To read the entire report Please click on the pdf File Below..