us-china trade negotiations are back in limbo

After weeks of increasing optimism, US President Trump yesterday surprisingly twitted that existing tariffs on the $200bn in Chinese imports will rise from 10% to 25% on Friday and that a 25% tariff will be levied on additional U$ 325 bn of goods.

Highlights:

  • After weeks of increasing optimism, US President Trump yesterday surprisingly twitted that existing tariffs on the $200bn in Chinese imports will rise from 10% to 25% on Friday and that a 25% tariff will be levied on additional U$ 325 bn of goods.
  • As a response, China considers pulling out of talks. However, latest news suggest that the large delegation from China will still go to Washington on Friday, but it remains unclear whether Vice Premier Liu He (China’s lead official in the negotiations) will head the team.
  • Trump clearly wants to raise pressure on China while China said it will not negotiate with a “gun at its head”.
  • Last week, there were speculations that a deal could be struck in the negotiations round scheduled for starting on Friday. While we continue to expect that a deal can be ultimately reached, a “face-saving” solution for China will likely last for longer now.
  • Stock markets were caught by surprise. At the time of writing, the Shanghai Index lost 5.8%, the Shenzhen Index 7.4%. The EuroStoxx50 receded by about 2%.

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US-CHINA TRADE NEGOTIATIONS ARE BACK IN LIMBO

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