James Politi and Demetri Sevastopulo in Washington
Equity markets fall as hopes fade for agreement before tariff increases are triggered
Donald Trump has ruled out a meeting with Xi Jinping, the Chinese president, before a March 1 deadline for the US to reach a trade deal with Beijing, dashing hopes of an agreement to prevent an escalation in tariffs between the countries next month.
Mr Trump had stoked expectations of an upcoming summit with Mr Xi just last week, when he said that no trade deal would be reached with China until the two presidents met “in the near future” to agree on the “more difficult points” in their economic relationship.
On Thursday, however, the US president answered “no” when asked by reporters in the Oval Office if he would meet Mr Xi before the deadline, and shook his head.
Global equities fell as hopes for an early deal were quashed and concerns about a deteriorating global economy continued to mount. The US S&P 500 index notched its second consecutive drop, ending 0.9 per cent lower.
One person familiar with the trade talks between the US and China said Mr Trump had proposed that the two leaders meet in Vietnam, where the US president is scheduled to hold a summit with North Korean leader Kim Jong Un at the end of February.
Mr Trump made the suggestion during a meeting with Liu He, the top Chinese trade negotiator who recently visited Washington. The person said China balked at the idea because Mr Xi did not want to be seen doing a deal with the US in Vietnam, for political and historical reasons. China made a counter-proposal that Mr Trump fly to Hainan, a southern Chinese island close to Vietnam, after his summit with Mr Kim, but Washington resisted that idea.
US and Chinese negotiators have claimed progress after several rounds of high-level negotiations between the countries to resolve their trade dispute, but also noted that a significant gap remains. Although China has offered to boost its purchases of US goods to narrow America’s trade deficit, Washington is demanding big concessions from Beijing on structural economic issues ranging from forced technology transfer to industrial subsidies, which the Chinese have been reluctant to accept.
“The president has indicated that he’s optimistic with respect to a potential China trade deal. But, but, but, but, but, we’ve got a pretty sizeable distance to go here,” Larry Kudlow, the director of the White House National Economic Council, said on Fox Business Network on Thursday.
Next week Robert Lighthizer, the US trade representative, and Steven Mnuchin, the US Treasury secretary, are scheduled to visit Beijing for a new round of talks, after Mr Liu, the Chinese vice-premier, led a Chinese delegation to Washington last week.
If no deal is reached by the night of March 1, tariffs on about $200bn worth of Chinese exports to the US will increase from 10 per cent to 25 per cent, which could inflict further damage on Chinese manufacturers who produce the products, and US businesses and consumers who purchase them.
An escalation in levies between the world’s two most powerful economies could deliver a serious blow to financial markets and the outlook for the global economy, which is already experiencing a slowdown and growing risks in other areas, including the possibility of a no-deal Brexit.
In his State of the Union address on Tuesday, Mr Trump did not mention a new meeting with Mr Xi, and insisted that any deal with China had to include “real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs”.
Mr Trump has frequently talked up his relationship with Mr Xi, and promised that a deal to rebalance the US trading relationship with China was forthcoming. But he has faced growing backlash from China hawks inside and outside the administration who fear that he may settle for a limited deal that soothes financial markets and prevents higher tariffs, but which fails to resolve many of the underlying tensions between Washington and Beijing.
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