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Last week, the US and China’s top trade negotiators have held “candid, pragmatic” talks, in their first meeting under the Biden presidency;  a highly  anticipated theme for markets has just kicked off.

The talks follow the Trump administration’s combative stance towards China and the resulting trade war.

So far, US President Joe Biden has not pulled back on the tough trade messaging to Beijing of his predecessor.

President Biden has insisted that existing tariffs will be kept in place for now.  Beijing has also maintained duties on some imports from America.

Talks started with US Trade Representative Katherine Tai and Chinese Vice Premier Liu He holding  a virtual meeting to discuss matters where both sides said they discussed the importance of the trade relationship between the two countries.

Meanwhile,  a Chinese think-tank said this weekend that  the Biden administration is unlikely to remove tariffs on Chinese goods in the short term.

Reuters reports that China and the United States might find a middle ground by increasing tariff exclusions as a way to reduce tensions.

”Washington may look to reduce the tariff burden through tariff exclusions, which would avoid resistance in congress and ease political pressure,” a  report said.

The Biden administration is conducting a comprehensive review of US-China trade policy, ahead of the expiry of the Phase 1 deal at the end of 2021.

Meanwhile, of note, Reuters also reported from The South China Morning Post, ”that Liu had led the Chinese delegation in previous trade exchanges with the administration of former US President Donald Trump”.

”Two weeks ago China’s Ministry of Commerce denied a media report that Liu, turning 70 next year, might be replaced by Vice-Premier Hu Chunhua, 58, as the top economic envoy to the US.

Observers said Liu, who oversees economic, financial, innovation and state firm reform in China, remained influential in trade issues, and the Chinese statement about the trade talks indicated no intention in Beijing to replace him, although he was likely to retire after a key Communist Party meeting next year.”

As for markets, the talks have been so far candid so there is little to deal with at this stage.

The status quo is not a trade, but any shifts in rhetoric will likely influence risk appetite in the weeks ahead with a focus on the US dollar and Chinese yuan in particular.

Traders may also opt to monitor the Aussie crosses considering its close ties to international trade.