US President Donald Trump's latest threat to ramp up tariffs on Chinese goods rattled global markets yesterday at the start of a crunch week of negotiations between the White House and Beijing. Negotiations are set to resume Thursday.
Trump's raging tweet announcing the tariffs on Sunday caught some American observers by surprise, seeing as the United States and China had both recently expressed optimism about reaching an agreement soon.
Trump's surprise threat Sunday of more tariff hikes triggered fears China might pull out of talks aimed at ending the fight over its technology ambitions. But make no mistake about it. US officials say they got an inkling of China's second thoughts in talks last week in Beijing, but that the backsliding became even more apparent in exchanges over the weekend.
Accusing Beijing of "reneging" on commitments it made in earlier talks, U.S. Trade Representative Robert Lighthizer said Monday that the Trump administration will increase its tariffs on $200 billion in Chinese goods early Friday, a sharp escalation in a yearlong trade dispute.
The blue chip index was down 2.2% in afternoon trading.
A Commerce Ministry statement announcing Liu's plans gave no indication whether other details, such as the size of his delegation, might change. That makes USA tariffs on Chinese goods more impactful than what China might impose on US goods. Estimates of lost potential sales so far range as high as $25 billion.
In response, a Chinese foreign ministry spokesman, Geng Shuang, said Beijing "is honest in continuing consultations". China wants them lifted; the US wants to keep tariffs as leverage to pressure the Chinese to comply with any agreement.
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"Week after week, we've heard there has been progress and that a deal would be reached", said Kate Warne, investment strategist at Edward Jones in St. Louis. Foreign Ministry spokesman Geng Shuang said in a press briefing on Tuesday that mutual respect was the basis for reaching a trade agreement.
"So by sending their chief economic negotiator to D.C., I think that shows you that China wants a deal to happen".
"They couldn't abandon it just because of a Twitter comment", said Ma.
Technology companies, which rely heavily on trade with China, bore the brunt of the selling on Tuesday. But they have yet to release details, and it is unclear whether the concessions will satisfy Trump.
FBN's Trish Regan supports President Trump's threat to raise tariffs on Chinese goods. The other sticking points are how to enforce an eventual deal and the fate of the existing U.S. tariffs on Chinese goods that Beijing wants removed.
An additional $325 billion worth of Chinese goods, he said, would face a 25 percent tariff "shortly" after that. Economic data also improved in the United States and China, which encouraged investors.
A stumbling block in the talks is US insistence on an enforcement mechanism with penalties if Beijing fails to keep its promises. "The Trump administration understands that the big problem with China is not the law itself, it's the lack of rule of law", Dufour said. Trump's decision to potentially upend an agreement that many expected to be finalized this week in Washington appears to be a political calculation that staying tough on China will be a better proposition in the 2020 campaign. China's economy is decelerating; the International Monetary Fund expects Chinese economic growth to slip from 6.6% past year to 6.3% in 2019 and 6.1% in 2020.
Oil prices recovered some lost terrain on Monday afternoon as traders continue to be concerned about the lower volumes from Iran following the full implementation of sanctions on that country.