USA, China Shelve Trade War – Mnuchin Says

by Ike Obudulu Posted on May 21st, 2018

Washington, D.C.,USA: U.S. Treasury Secretary Steven Mnuchin said on Sunday that the U.S. trade war with China is being shelved while the two countries work on a plan that will see China buy significantly more American goods and services.

“We’re putting the trade war on hold,” Mnuchin said referring to President Trump’s earlier announcement of $150 billions worth of tariffs on top of import duty taxes on Chinese steel and aluminum.

“So right now we have agreed to put the tariffs on hold while we try to execute the framework,” Mnuchin continued.

The U.S. and China announced Saturday that the two nations had agreed on a plan to “support growth and employment” in America after two days of negotiations. But the U.S delegation, which included Mnuchin, Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer, failed to reach its goal of getting China to accept a $200 billion cut in the U.S. bilateral trade deficit

But White House chief economic adviser Larry Kudlow said in a separate interview Sunday that negotiations weren’t at the “stage yet” where Trump’s threat of tariffs were off the table, adding they were an important part to any trade talks.

“You cannot do this kind of major change without using everything that’s in your quiver and I think the president has made that very clear,” Kudlow said.

Kudlow also contradicted Mnuchin in claiming the $200 billion trade deficit target was a figure that interested President Trump, but it was “too early for exact, precise details” of the plan.

Chinese President Xi Jinping’s special envoy and Vice Premier Liu He also said that China and the United States have reached consensuses on economic and trade issues, pledging not to engage in a trade war.

The two sides will enhance their trade cooperation in such areas as energy, agriculture products, health care, high-tech products and finance, Liu said,

The two countries will also strengthen their cooperation in mutual investment and intellectual property protection, Liu said, adding that it not only benefits the two nations, but also helps support the stability and prosperity of the global economy and trade.

Liu also said that China will accelerate implementation of Xi’s remarks at the Boao Forum for Asia Annual Conference 2018 earlier in April, when the Chinese top leader proposed to further China’s efforts to facilitate the market access, build a more attractive investment environment, strengthen intellectual property protection and increase imports from other countries.

Senate Minority Leader Chuck Schumer, D-N.Y., criticized the joint U.S.-China statement Saturday for lacking specifics and a mention of Chinese telecommunications firm ZTE Corp.

“The key to a strong agreement is protecting our intellectual property here in America and stopping the Chinese from keeping out our best goods until we hand over our trade secrets and know how in such things as required joint ventures. The joint statement has nothing specific on those fronts and no amount of immediate and short term purchases of American goods will make up for that. Furthermore, there is no mention of ZTE,” Schumer said.

Mnuchin said Sunday conversations about ZTE were “completely independent” of negotiations last week because it concerned enforcement rather than trade.

“We didn’t agree to any quid pro quo,” he said. “And I’m not going to go through the discussions on the enforcement issue.”

Trump tweeted on May 13 that he was working with Chinese President Xi Jinping to overturn a seven-year ban prohibiting U.S. businesses from selling parts and software to ZTE Corporation.

The Commerce Department barred supply sales of U.S. products to ZTE in April after the company pleaded guilty in 2017 to violating sanctions on Iran.

The United States cares more about getting a good agreement than quickly concluding the renegotiation of the North American Free Trade Agreement, the US Treasury secretary also said Sunday.

An informal deadline came and went this week for reaching an agreement in time for the Republican-controlled Congress to approve it before the November 6 midterm elections.

House Speaker Paul Ryan said on Friday there was still “wiggle room” in the legislative calendar, giving negotiators a couple more weeks.

US Treasury Secretary Steve Mnuchin, however, acknowledged that the sides, though working hard to get a deal, are still “far apart.”

“The president is more determined to have a good deal than he is worried about any deadline,” Mr Mnuchin said on Sunday. “Whether we pass it in this Congress or pass it in a new Congress, the president is determined that we negotiate Nafta,” he added.

Mr Trump has repeatedly threatened to pull out of the trade agreement if a satisfactory deal cannot be reached.

He blames Nafta, which has molded trade between the United States, Mexico and Canada since 1994, for the loss of millions of US jobs and dislocations in the auto and other industries.

Despite the lack of a breakthrough, Mr Mnuchin said the administration was focused on getting an agreement.

“I can tell you I’ve been in contact with the finance ministers in both Canada and Mexico. President Trump and (Canadian Prime Minister) Justin Trudeau had a very good conversation.

“We are still far apart but we are working every day to renegotiate this agreement and that’s what we are focused on,” he said.

On Friday, Mr Trudeau said he was “feeling positive” a deal would be reached, saying, “It’s right down to the last conversations.”

He described trade in automobiles and auto parts as the last major sticking point in the negotiations to revamp the trade agreement. The United States wants to increase the amount of American content in cars eligible to receive duty-free treatment.

Financial Markets Cheer U.S. Suspension Of China Tariffs In Early Trading

U.S. stock futures soared after U.S. Treasury Secretary Steven Mnuchin said the U.S. trade war with China is “on hold” after the world’s two largest economic powers agreed to drop their tariff threats while they work on a wider trade agreement.

S&P mini futures ESc1 rose 0.6 percent in early Asian trade on Monday.

Investors trading Asian stocks were cautious. Japan’s Nikkei .N225 ticked up 0.1 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was off 0.1 percent in early trade.

U.S. bond yields rose as safe-haven demand for debt fell, with the 10-year Treasuries yield rising 1.5 basis points to 3.082 percent US10YT=RR, near a seven-year high of 3.128 percent hit on Friday.

In the currency market, higher U.S. yields helped to strengthen the dollar against a wide range of currencies.

The euro dipped 0.1 percent to $1.1756 EUR=, hovering above Friday’s five-month low of $1.1750.

The European common currency was also hit after two anti-establishment parties pledged to increase spending in a deal to form a new coalition government.

The dollar maintained an uptrend against the yen, rising 0.25 percent to fetch 111.01 yen, JPY=, close to Friday’s four-month high of 111.085.

Oil prices held firm near 3-1/2-year highs after Venezuelan leader Nicolas Maduro appeared to be set for re-election, an outcome that could trigger additional sanctions from the United States and more censure from the European Union and Latin America.

Oil prices have been supported by plummeting Venezuelan production, in addition to a solid global demand and supply concerns stemming from tensions in the Middle East.

U.S. crude futures rose 0.6 percent to CLc1 $71.69 per barrel, near last week’s 3 1/2-year high of $72.30 while Brent crude futures LCOc1 notched up 0.6 percent to $78.95 per barrel. It had risen to $80.50 last week, its highest since November 2014.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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