US Trade Talks With China Collapse: No Further Talks Scheduled

Fri, Aug 24, 2018 - 8:12am

Either Trump backs down from repeated threats or more tariffs are coming as talks with China collapse.

Be prepared for an escalating trade war as U.S.-China Trade Talks End With No Sign of Progress.

Read Will the Trade War Derail the Longest Bull Market in History?

Trade talks between the U.S. and China failed to produce any visible sign of progress, reducing the prospects of a deal soon, people closely tracking the talks said.

The two sides “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship, including by addressing structural issues in China,” the White House said, adding that the U.S. side would brief more-senior officials on the results.

The statement was significant for what it didn’t say as well, people said after the talks. There was no discussion of follow-up talks or any accomplishments.

Chinese Vice Minister Liu He, who has been leading the Chinese negotiating team, laid out his views of the U.S. requests of China, people briefed on the talks said. They said Mr. Liu seemed to have a clear understanding of U.S. demands.

Those people said the Chinese have divided U.S. demands into three buckets. Roughly 30% to 40% of the U.S. requests involved additional Chinese purchases of U.S. goods, which Chinese officials believe could be met immediately. Another 30% to 40% involved market openings, such as allowing foreign financial firms to own a greater percentage of Chinese ventures and giving them broader authority to operate. Those could take several years of negotiations.

The remaining 20% to 40% involve U.S. demands for changes in Chinese industrial policy. Those include ending unfair subsidies of Chinese high-tech firms, letting U.S. data firms operate without interference or ending pressure on U.S. firms to transfer technology. The Chinese won’t agree to negotiate on many of these, those briefed on the plan said, because of national-security or political reasons. Beijing has said it doesn’t force U.S. companies to share technology with their Chinese counterparts.

For now, the U.S. continues to turn to tariffs to pressure China. As negotiations wrapped up on Thursday, the U.S. put in place $16 billion in tariffs on Chinese goods, raising the total to $50 billion. The Chinese have matched them dollar for dollar.

Public hearings continued on U.S. plans to hit another $200 billion in Chinese imports with tariffs as high as 25%, which would place levies on about half of Chinese imports. If the U.S. continues on the same schedule as in the past, those tariffs could start to take effect in September.

My base scenario at this point is that trade repercussions will cost Republicans the House in November.

It is not out of the question for Republicans to lose the Senate but that is far more unlikely.

For Republicans to lose the Senate, it may take a stronger economic turn down, perhaps coupled with a stock market dive.

Regardless, Trump is truly skating on thin ice. However, November is a long way off politically speaking. There is plenty of time for Trump to recover but he cannot go on with these inane tariff battles that few will support.

Trump has his out card prepared: "Blame the Fed" rather than himself.

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