Trump and Xi declare trade truce at G20

[Raphael]

https://www.theguardian.com/world/2018/dec/02/donald-trump-and-xi-jinping-declare-trade-truce-at-g20

Donald Trump has delayed for 90 days his threatened imposition of 25% tariffs on Chinese imports after a dinner meeting with Xi Jinping, to give time for negotiations on longstanding trade disputes between the two countries, the White House has said.

Trump said their dinner after the G20 summit in Buenos Aires “was an amazing and productive meeting with unlimited possibilities for both the United States and China”.

A statement by the White House spokeswoman, Sarah Sanders, issued as Trump was on his way back to Washington, listed concessions the Chinese president was said have made, including stopping Chinese exports to the US of fentanyl, a synthetic opioid, and the death sentence for convicted traffickers.
The statement said that Xi, “in a wonderful humanitarian gesture, has agreed to designate fentanyl as a controlled substance, meaning that people selling fentanyl to the United States will be subject to China’s maximum penalty under the law”.

The press statement said Trump would not follow through his threat to raise tariffs on Chinese goods from 10% to 25% in the new year, which he had described as a reprisal for a long history of unfair Chinese trade practices. There were widespread concerns that such a large hike in tariffs could trigger a serious trade war between the two countries, with devastating results for the global economy.

According to Sanders, Xi agreed that China would purchase “a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries”.

“China has agreed to start purchasing agricultural product from our farmers immediately,” the statement said. Since trade tensions have escalated under Trump, China has radically reduced its import of US soy beans and other farm products, with direct impact on farmers in the US mid-west where Trump has drawn much of his political support.

Sanders said the two leaders had agreed to begin immediate negotiations on “structural changes” on chronic issues of contention, including the practice of forcing US investors to hand over technological knowhow, intellectual property protection and non-tariff barriers to entry for US businesses. The negotiations would also encompass cyber theft, services and agriculture.

“Both parties agree that they will endeavour to have this transaction completed within the next 90 days. If at the end of this period of time the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%,” Sanders said.

The Chinese government also welcomed the outcome of the talks.

“The two presidents agreed that the two sides can and must get bilateral relations right,” Wang Yi, China’s lead diplomat, told reporters in Buenos Aires. “Discussion on economic and trade issues was very positive and constructive. The two heads of state reached consensus to halt the mutual increase of new tariffs.”

Wang did not give as many details as the White House, but said: “China is willing to increase imports in accordance with the needs of its domestic market and the people’s needs, including marketable products from the United States, to gradually ease the imbalance in two-way trade.”

 

[JSCh]

China, U.S. agree to avoid escalation of trade restrictive measures
Source: Xinhua| 2018-12-02 12:07:43|Editor: Lu Hui

Chinese President Xi Jinping (R) meets with his U.S. counterpart Donald Trump in Buenos Aires, Argentina, Dec. 1, 2018. President Xi attended a working dinner with President Trump in Buenos Aires on Saturday. (Xinhua/Li Xueren)

BUENOS AIRES, Dec. 1 (Xinhua) -- China and the United States on Saturday reached consensus on economic and trade issues and agreed to avoid escalation of trade restrictive measures.

Chinese President Xi Jinping and his U.S. counterpart, Donald Trump, held a meeting in the Argentine capital, Buenos Aires, on Saturday evening.

After the meeting, officials in charge of the Chinese economic team told Xinhua that the two sides held discussions on China-U.S. economic and trade issues and reached consensus.

The two heads of state spoke highly of positive and effective consultations held recently by the economic and trade teams of both sides.

The two sides recognized that their healthy and stable economic and trade relations conform to common interests of the two countries and the whole world.

The two sides decided to avoid escalation of trade restrictive measures, without further raising existing tariffs imposed on each other and slapping new additional tariffs on other products.

The two sides agreed to take immediate efforts to address issues of mutual concern based on mutual respect, equality and mutual benefit.

As required by the 19th National Congress of the Communist Party of China, Beijing is committed to deepening reform and furthering opening-up. In the process, some economic and trade issues that are of Washington's concern will be solved. Meanwhile, the U.S. side will actively address China's concerns on economic and trade issues.

Xi and Trump have instructed the economic and trade teams of both sides to intensify consultation to reach an agreement, so as to lift the additional tariffs imposed this year and bring the bilateral economic and trade relations back to a normal track as soon as possible with a win-win outcome.

 

[ChineseTiger1986]

It is just a temporary cease-fire, the war will be ongoing in the next year.

 

[Beast]

It is just a temporary cease-fire, the war will be ongoing in the next year.

The US may back down after that.. See how China need to resumed certain proportion of US agriculture shows Trump are under fire after China massive boycott of US product that hurts US farmer badly. If China after that stop importing again. Trump will be under pressure again...

 

[ChineseTiger1986]

The US may back down after that.. See how China need to resumed certain proportion of US agriculture shows Trump are under fire after China massive boycott of US product that hurts US farmer badly. If China after that stop importing again. Trump will be under pressure again...

The US politics is now dominating by the extreme anti-China warhawks, so there is no way they will back down as this is their last stand against China.

I can definitely feel their pain, the level of their current agony is just comparable to the Ming Dynasty before getting crushed by the Qing Dynasty.

 

[atan651]

All those bravado talks about crushing China before the meeting didn't happen. Trump is a paper tiger after all! For now, the Celestial Dragon managed to maul the Bald Eagle. Great job President Xi and team China!

 

[Path-Finder]

its called "bollocks"

 

[艹艹艹]

temporary

 

[艹艹艹]

@Bussard Ramjet

@Viva_Viet

 

[rambro]

US regime whoever is their president is fickle

Double talk

 

[Kyle Sun]

fking pussy CN gov.

 

[oprih]

Trade war or no trade war, China is the winner in both scenario.

Anyway, since new tariffs are suspended, looks like @Viva_Viet @Bussard Ramjet and other pdf members wet dreams will be suspended too.

 

[TheTruth]

China should have crushed US equities and pressured US ag a bit harder first. I think the Chinese will never learn that humanitarian gestures only work on humans.

 

[TaiShang]

All those bravado talks about crushing China before the meeting didn't happen. Trump is a paper tiger after all! For now, the Celestial Dragon managed to maul the Bald Eagle. Great job President Xi and team China!

China is actually playing with the US, making promises without signing any document. China simply helps Trump buy time.

***

Preparing for the next US recession

One thing was clear from this weekend's G20 summit. Asia and the world face many risks, and most of them emanate from the United States of America.

The Trump–Xi trade deal is a clear example. According to the statement from the White House, the United States has agreed not to increase tariffs from 10 to 25 per cent. In return, China has agreed to buy a 'substantial' amount of exports from the United States to 'reduce the trade imbalance between our two countries'.

This is not how economies work.

America's trade deficit with China reflects its dependency on the Chinese to finance US investment and consumption. China's promise to buy a 'substantial' amount of US agricultural goods, for example, will require US farmers to expand production. Doing so will require investment. Given Americans do not save enough to finance this increase in investment, where does it come from?

The answer is overseas. This inflow of capital will push up the US dollar, worsening the trade deficit. When the agricultural products are finally bought by China, the US dollar will go up again, worsening the trade deficit even further.

The deal between Trump and Xi will change the composition of the US trade deficit — American farmers will undoubtedly be better off — but the deal will not change the underlying saving-and-investment behaviour and will not, therefore, alter the overall trade balance.

The deal does, however, achieve plenty of other things. It undermines the rules-based global trading system. It will divert trade away from other countries, including Australia's farmers and energy suppliers. It will do nothing to support global growth. It will do nothing to address the ongoing challenges in the trading system. It doesn't even promise a reduction in the existing tariffs. This deal highlights that the United States is increasingly a source of risk for the world. America's trade war is disrupting Asian supply chains. It threatens growth and prosperity throughout the region. Tightening financial conditions led by the US Federal Reserve are shaking Asian financial and currency markets. A turbulent US stock market is reverberating around regional stock markets.

Trump's attacks on institutions such as the US Federal Reserve at home and the World Trade Organization abroad threaten the predictability and certainty of policies that underpin investment and consumption. Elevated geopolitical tensions around the reimposition of US sanctions on Iran risk cascading into other challenges in the region.

At the heart of these risks is enormous policy uncertainty. What will Trump do next?

The mid-term election results certainly weakened the Trump administration. A Democrat-controlled House of Representatives is a welcome constraint on his power. But wounded beasts are unpredictable. Trump might respond to weakness domestically by projecting strength abroad. US presidents have limited influence when it comes to domestic policy. The opposite is true when it comes to foreign policy, particularly in trade, finance and security.

Trump's next move will be heavily influenced by what happens in the US economy. The economic recovery will soon be the longest in US history. It began well before Trump entered the White House. Trump has used a strong economy to justify and expand his policy agenda. The economy is currently on full throttle with the stimulus of the Trump tax cuts superimposed on economic recovery.

But what happens if the US economy falters? Given that so many of the world's risks are coming from the United States, the possibility that might happen warrants serious consideration.

In this week's lead essay, Adam Triggs warns that all the indicators suggest that the next US recession is right around the corner. It is a matter of when, not if, and the implications for Asia are significant. The region best get ready now.

As Triggs notes, signals that predict US recessions are far from perfect. But what is striking right now is just how many of them are now flashing red.

One relates to the pattern of the US business cycle. The US economy has never gone longer than a decade without a recession, a milestone which is fast approaching.

Another is the monetary policy stance of the US Federal Reserve. Four of the last five episodes of Fed rate rises have been followed by a recession. With the latest episode already underway, investors expect at least four more rate rises before December 2019.

Term spreads are another predictor flashing red. A flattening yield curve — when short and long-term interest rates start converging — has predicted every US recession in the last 60 years.

Another recession predictor is how much spare capacity there is in the economy. The last 10 US recessions were preceded by a closing of the output gap. The US output gap is now near zero, employment is heading beyond full employment and, while inflation and wages are moving slowly, they are beginning to shift.

Triggs is not alone in his warning of a looming US recession. Many are forecasting an upcoming US recession. Bank of America Merrill Lynch, The Economist Intelligence Unit and two-thirds of the economists surveyed by the National Association for Business Economists all predict a recession around 2020.

The implications for Asia are as complicated as they are serious.

Triggs argues that, should the US economy in fact slow down, the US Federal Reserve will need to resort almost immediately to quantitative easing or some other form of politically controversial unconventional monetary policy. The last time the United States did this it sent a wall of capital towards Asia. While Asian economies welcomed the increased capital inflows, they did not welcome the volatility it wreaked on their financial markets and exchange rates, let alone when the tide pulled back at the end of it.

What should Asia do?

Now is the time for Asia to build domestic buffers against external economic shocks wherever possible: in fiscal policy, monetary policy and the accumulation of foreign exchange reserves. But, when the shock actually hits, regional cooperation will be key to seeing it off. Strengthening regional crisis-response efforts, like the Chiang Mai Initiative Multilateralization and the ASEAN+3 Macroeconomic Research Office, is the starting point.

Building the political will and framework for effectively activating regional support is even more important. Better linking these regional mechanisms to global institutions, like the International Monetary Fund, is key to ensuring effective surveillance of risks and strong responses if things go bad. And putting in place adequate swap arrangements to buttress these regional and multilateral mechanisms is an essential supplement.

There is much that Asia can do to weather the upcoming storm. But it needs to fix the roof while the sun is still shining.


Other recent articles in which you may be interested from the East Asia Forum are listed below. You can click the title of each one or visit www.eastasiaforum.org for daily content.

Editors
East Asia Forum
3 December 2018

***

@Chinese-Dragon , @Cybernetics , @TheTruth

 

[Chinese-Dragon]

Given Americans do not save enough to finance this increase in investment, where does it come from?

The answer is overseas.

This is really at the heart of why the American Current Account deficit will not be fixed. They are addicted to spending, fueled by ever more borrowing from overseas.

Americans don't seem to understand the concept of tightening their belt, whether in regards to spending based on deficits and borrowed money, or stuffing their faces full of junk food.

On the other hand, look at countries like China, Germany and Japan, which all have a high savings rate. And lo and behold, these countries all have a Current Account surplus, i.e. they are net lenders.

For America to replicate that, they will need to change their habits, and tighten their belts. Otherwise their deficits and diabetes will continue to skyrocket.

But we all know that will not happen. Any US politician that advocates for such responsible economic behaviour will instantly lose all their political support.