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Trump delays tariff hike on Chinese goods, cites trade talk progress

This article is more than 12 months old

Markets cheer prospect of US striking a deal with China

WASHINGTON President Donald Trump said on Sunday he would delay an increase in US tariffs on Chinese goods thanks to "productive" trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if the progress continued.

The announcement was the clearest sign yet that China and the United States are closing in on a deal to end a months-long trade war that has slowed global growth and disrupted markets.

Mr Trump had planned to raise tariffs to 25 per cent from 10 per cent on US$200 billion (S$270 billion) worth of Chinese imports into the US if an agreement between the world's two largest economies was not reached by Friday.

After a week of talks that extended into the weekend, Mr Trump said those tariffs would not go up for now. In a tweet, he said progress had been made in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.

As a result, he said: "I will be delaying the US increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for US & China!"

Mar-a-Lago is the president's property in Florida, where the two have met before.

The president did not set a new deadline for the talks to conclude, but told US state governors gathered at the White House that there could be "very big news over the next week or two" if all went well.

The White House did not provide specific details on the kind of progress that had been made.

China's official Xinhua news agency said in a commentary that the goal of an agreement was getting "closer and closer", but also warned that negotiations would get more difficult.

"The emergence of new uncertainty cannot be ruled out, and the long-term nature, complexity, and difficulty of China-US trade frictions must be clearly recognised," Xinhua said.

Mr Trump and Mr Xi called a 90-day truce last year to give their advisers time to negotiate a deal. The threat of tariff increases represented significant leverage for the US team as Beijing is trying to stabilise China's cooling economy.

"We can't be sure whether this constitutes a major cave or success because we don't know the details of what has been negotiated. But... agreeing to extend negotiations a few more weeks definitely is in China's interests," said China expert Scott Kennedy at the Center for Strategic and International Studies in Washington.

"At this point, the US has likely gotten all it's going to get out of China."

J.P. Morgan Asset Management market strategist Tai Hui said the move suggested both sides wanted a settlement of the dispute and added that further tariff escalation would have added to concerns about the US growth outlook.

Markets, which have been sensitive to the dispute as it has slowed global growth, and some US trade associations cheered Mr Trump's move.

Chinese stocks and the yuan jumped at the start of trade, with the benchmark Shanghai Composite index up 2.1 percent, its highest since Aug 1, and the yuan hit its strongest level against the dollar since July.

While Mr Trump said on Friday there was a "good chance" a deal would emerge, his lead negotiator, US Trade Representative Robert Lighthizer, emphasised that some major hurdles remained. Mr Lighthizer has been a key voice pushing China to make structural reforms.

Washington wants a strong enforcement mechanism to ensure that Chinese reform commitments are followed through and a source briefed on the talks said enforcement remained a major sticking point.- REUTERS

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