The US and China will hold low-level trade talks on Wednesday and Thursday (22-23 August) in Washington and analysts at Nomura that the talks will be led by Treasury Undersecretary David Malpass and Vice Commerce Minister Wang Shouwen.
Key Quotes:
“The choice of lower-level officials, a step back from previous discussions between Treasury Secretary Mnuchin and Vice Premier Liu He, is consistent with both sides seeking engagement but without an expectation of reaching a major agreement. In that sense, we do not expect this round of discussion to materially lower tensions between the two countries or sway President Trump from increased aggression towards China.”
“However, various news reports on Friday afternoon indicated that this round of talks could lay the groundwork for an eventual Trump-Xi bilateral meeting at a summit in November, possibly at the G20 meeting in Argentina. In that sense, it will be important to evaluate whether or not the two sides can find common ground next week and make progress towards a higher level meeting. At the moment, it appears unclear if fundamental differences in trade policy between the US and China would be resolved.”
“In addition to the talks, the next round of US-China tariffs, 25% on roughly $16bn, will go into effect next week on 23 August. This follows the initial round of 25%/$34bn that took effect on 6 July and comes at a time when the USTR is reviewing another 25%/$200bn that could go into effect sometime within the next few months. USTR will hold a series of public hearings next week on the round currently under review (20-24, 27 August).”
“Finally, NAFTA negotiations continued this week without an announced deal between the US and Mexico, lowering expectations that a deal will be reached before the 25 August deadline that would allow outgoing President Peña Nieto to sign the agreement before leaving office. Negotiations will continue next week in Washington but could slow somewhat after the end of August.”
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