[ad_1]
Trump has repeatedly slammed China for indulging in what he says are unfair trade practices, particularly with regards to access to its giant market, intellectual property and technology transfers. He has said that a big trade deficit with China shows the United States is being ripped off.
The talks are aimed at settling a dispute that has hurt Chinese exporters, damaged parts of the US economy, and slowed global growth since it began last July.
The United States fired the first big salvo back then, imposing 25% tariffs on $50 billion worth of Chinese exports from the aerospace, robotics and auto industries. China retaliated with its own tariffs on American goods worth $50 billion, including agricultural products and chemicals.
Investors are nervous
Fears appeared to be waning on Tuesday, as it became clear that the two sides are still talking. The Shanghai Composite and Hong Kong’s Hang Seng both posted gains, while losses on major European indexes were limited to less than 1%.
US stocks futures were down roughly 0.5%.
Investors had been expecting a timely resolution of the dispute between Beijing and Washington. That assumption was a key driver of the 2019 US stock rally.
Global growth at risk
It’s not clear whether Trump’s threat indicates a tougher US position in the talks or is simply a negotiating tactic. Lighthizer and US Treasury Secretary Steven Mnuchin on Monday accused Beijing of reneging on agreements already reached.
China’s foreign ministry said Tuesday that “negotiating is a process of discussions,” and that it’s “natural for the two sides to have disagreements.”
“China won’t avoid the problems, and we are sincere in continuing the negotiations,” spokesperson Geng Shuang told reporters in Beijing.
Analysts say an escalation could hit growth both economies and drag down global growth.
“Escalation of the trade war could be the trigger for weaker global growth,” said Tai Hui, chief market strategist for Asia at JP Morgan Asset Management. “We continue to be constructive on the US economy, but external shocks could derail such optimism.”
If Trump carries out his wider threat to impose a 25% tariff on nearly all of China’s exports to the United States, that could knock 0.3% off China’s gross domestic product, according to Julian Evans-Pritchard, senior China economist at Capital Economics.
“There will be a direct hit to Chinese growth,” he said, adding Beijing would likely respond with new measures to stimulate the economy.
Business warns
The US business community supports Trump’s efforts to rein in intellectual property theft and open up China’s market. But companies generally oppose tariffs, which they say raise costs and hurt demand.
Global automakers, which also face separate US tariffs on steel and aluminum, have been hit hard.
BMW hiked prices of two popular SUVs it sells in China, its largest market, last year after Beijing retaliated against US tariffs with taxes on vehicles made in the United States. BMW has a huge plant in South Carolina.
The company said on an earnings call Tuesday that it continues to monitor the “volatile” trade situation. “We are, of course, in favor of free trade,” CEO Harald Krüger told reporters.
“A sudden tariff increase with less than a week’s notice would severely disrupt US businesses, especially small companies that have limited resources,” the National Retail Federation said in a statement Sunday.
Sherisse Pham and Steven Jiang contributed to this report.
[ad_2]
Source link