Markets hold their breath as US and Chinese trade talks resume
Trade negotiations between the US and China are set to resume today in a bid to avert a trade war between the world's two largest economies.
Treasury undersecretary David Malpass will meet Chinese Commerce vice minister Wang Shouwen, continuing discussions through to tomorrow.
While President Donald Trump said earlier this week he did not "anticipate much" from the talks, adding that China had "become spoiled", the Chinese foreign ministry said it hoped for a good outcome.
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Higher-level negotiations in June with the more significant US commerce secretary Wilbur Ross proved fruitless. The US currently has tariffs of 25 per cent on $34bn of Chinese goods, a rate that was mirrored by Chinese retaliatory measures.
President Trump also announced earlier this month taxes on a further $16bn worth of goods, expected to be imposed from tomorrow, with China set to do the same.
US demands have previously included protection of intellectual property and a reduction of the American trade deficit. Currently the US has an annual trade deficit of $200bn with China.
Despite the low level nature of the staff conducting the fresh round of talks and the dollar falling from 78p to 77p this week on the back of Trump's criticism of the Federal Reserve, there is a sense of confidence, albeit subtle, in international markets around the fact that the superpowers are holding discussions.
Analyst Lukman Otungua, from online trading broker Forex Time, said: "While the possibility of a breakthrough deal from the lower level trade talks remains very low, any signs of further negotiations in the future could support global sentiment.”
But Joshua Mahony, market analyst at IG, said Trump has created a "volatile" trade environment, and his latest comments have "slapped down" market optimism.
"With the chance of yet another disappointing and combative meeting between Chinese and US officials, the recent selloff in the dollar could be a good opportunity for traders to look for another return to strength for the dollar as they seek out havens in the event of a likely no deal," he added.
Chatham House fellow Marianne Schneider-Petsinger said that though holding discussions was positive, she “didn’t expect major development.” “Unless the President is involved directly, deals are unlikely” she said, pointing to the tariffs introduced after the May discussions. Schneider-Petsinger said that the given the US is “unclear of its priorities, China is unable to respond.”
Chinese Foreign Ministry spokesman Lu Kang said the country hopes for a “good outcome” in the talks, adding: "We hope that everyone can calmly sit down together and have earnest discussions toward an outcome that is in beneficial to both sides.”
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