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Analysts at Danske Bank point out that there was a lot of news on the trade conflict between US and China as first, there was a story in Bloomberg saying the US and China are trying to restart trade talks, as Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are having private conversations on the subject.

Key Quotes

“If this is true, it is the first time the two countries are trying to get back to the negotiation table, after Trump left it in May.  Later, there was another story in Bloomberg saying the Trump administration is considering increasing the tariffs from 10% to 25% in the next round (USD200bn) in an attempt to put more pressure on China.  If so, this should be announced ahead of the public hearing taking place late August.”

“It is difficult to say what this all means, but overall it seems like an escalation  , although the stories are not confirmed yet. Mnuchin is a ‘dove’ on trade policy and is seems like the trade hawks are more powerful, probably due to the fact that Trump is still under pressure domestically to stick to a tough course with China ahead of the mid-term elections in November.”

“The attempt to try to force China back to the negotiation table is probably also going to backfire, as China has little more to offer than it has done already.  In our view, a deal is still far away, and we would consider an increase to the proposed tariff rates from 10% to 25% an escalation.”