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US/China to release trade statement

By David Morrison  |  09/01/2019 16:09

Global equity markets extended gains on Wednesday following upbeat comments from both the US and China over trade talk progress. But investors will have to wait until tomorrow morning for a joint statement
US/China trade talks ended this morning having been extended by an extra day. Investors viewed news of the extension as positive, as it could suggest that both sides were anxious to take the time to ensure that any agreement will be considered substantive by the markets. Indeed, comments from US and Chinese participants were upbeat. This has given investors hope that the latest talks have gone a long way to calming tensions and ultimately ensuring that President Trump won’t follow through on his threat to raise tariffs on $200 billion-worth of Chinese exports to the US to 25% from 10% on 1st March.

Statement due tomorrow

But although the talks are over, investors will have to wait until tomorrow morning for a joint statement on the outcome. It’s quite possible that China has adopted the same conciliatory approach that it did back in early December during the G20 meeting in Argentina. Back then, China agreed to a bunch of US-friendly trade measures including buying more soyabeans, cutting tariffs on US auto imports, a promise to open their markets to foreign firms and the formation of laws to bring an end to forced technology transfers. The concessions led to Trump postponing his tariff increase threat by 90 days. But there are still major issues which must be addressed, principally intellectual property theft and cybersecurity. China has long-term ambitions to overtake the US in terms of its economy and lead the world in technological innovation. Consequently, the Trump administration is going head-to-head with China as the US has no intention of giving up its pole position in the world, either economically, or militarily. And considering the chances of a quick resolution to the current trade dispute, it’s worth remembering the US’s actions towards two of China’s most technologically important companies.

Huawei and ZTE

As the ink was drying on December’s trade agreement, Meng Wanzhou, the Chief Financial Officer of Huawei Technologies, was arrested in Canada at the request of the US which is currently pushing for her extradition. The charges relate to Huawei’s dealings with Iran and Syria and the whole issue has inflamed tensions between Canada, the US and China. Huawei has been under the spotlight for a while now as it has sought to win important, and sensitive, contracts with Western governments and major corporations. Last year US policymakers banned companies from selling products, spare parts, technology and software to Huawei and its main Chinese rival ZTE. There are growing fears that Huawei’s telecommunications equipment could contain pathways that would allow for Chinese espionage. Australia and New Zealand recently banned Huawei from building their next generation of mobile phone networks.

Not over yet
So, there’s a lot more than tariffs playing into the US/China trade dispute. National security is certainly one of the top concerns for the US and other Western powers. Consequently, no matter what joint statement comes out of Beijing overnight, it seems highly probable that there will have to be high-level talks in the weeks ahead to ensure that Trump doesn’t increase tariffs in March.

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