US and China still too far apart on trade talks – ING

According to Raoul Leering, head of international trade analysis at ING, today’s news that China could be prepared to buy additional soy beans adds to the optimism that a deal might be struck.

Key Quotes

“At the same time, the US plans to limit the funding of Chinese companies through US capital markets and has announced a blacklist of Chinese companies, along with sanctions against Chinese officials involved in the clamp down on Uighur people in the West of China. This shows that tensions between the two super powers remain high.”

“Regarding the trade issues specifically, caution is warranted. Things have become complicated for President Trump. Polls show US voters are increasingly worried about the effects of his economic (read: trade) policies, and with just over a year to go before the next Presidential election, it would behove him to strike a quick ‘mini’ deal. This would substantially diminish the economic uncertainty which has caused US business sentiment to plunge and put a lot of investment on hold.”

“But the chances of such a deal happening quickly seem low, as Trump would need to take out at least some of his demands which are clear red lines for China.”

“For now, both American and Chinese negotiators will be reluctant to acquiesce. This means the best obtainable result for the upcoming round of talks would be for the US to put on hold higher US tariffs on the 15 October and 15 December in exchange for a Chinese commitment to step up buying of American agricultural and energy products, or something very similar to this.”