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Let's make a deal! China looking to close a trade deal with US as negotiators arrive in Washington

Apr 03, 2019

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • US and China, come on down!

 

  • The US is welcoming a senior delegation of Chinese trade negotiators to Washington, DC today to continue negotiations 
  • These talks seek to build on those that were held in Beijing last week and others previously

 

  • What's behind door #1?

 

  • Behind door #1 were a number of Chinese concessions made along the way to appease US demands, including greater soybean purchases to help lower the US trade deficit with China
  • This past week came news that the cloud-computing market will open to US firms -- today, US firms can only access this sector through a JV with a local player

 

  • What about door #2?

 

  • Ahead of this week's meetings, China touted "new progress" during the last round in Beijing
  • Behind door #2 are further concessions from China to create a positive move going into this week's talks:
    • China will extend the suspension of higher tariffs on US autos
    • China will add fentanyl to its list of controlled substances starting May 1st, solidifying in law a promise made by President Xi to President Trump during talks in Argentina

 

  • So, how about a deal?

 

  • White House Economic Adviser Larry Kudlow gave upbeat comments today saying negotiators are "making great headway"
  • Open items include protection of US intellectual property and enforcement mechanisms within any agreement
  • A significant sticking point is the US demand for regular meetings to assess China's adherence to it with the ability for the US to impose tariffs without reprisal if China fails to adhere to the deal
  • China said it will extend its suspension of retaliatory tariffs on autos and include fentanyl on its list of controlled substances, in an effort to generate a positive atmosphere for these talks
  • The US is seeking full compliance from China by 2025 in any final trade deal
  • It is clear the markets are pricing in a deal being closed sooner than later and anything short of that is likely to generate a strong risk-off move

 

 

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