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US and China Trade Talks Resume: Will We See Results?

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  • The US and China trade talks will likely resume next week.
  • So far, the two countries have stayed in contact through phone conversations. They reached a truce in June.

US and China trade talks

According to CNBC, “American trade negotiators will soon head to China for face-to-face talks as the world’s two largest economies try to strike a deal.” Notably, the two countries agreed on a truce last month after the meeting between President Trump and President Jinping. So far, the two sides have only had phone conversations. In-person talks have been elusive despite the truce being in place for almost four weeks.

While the trade deal is reportedly 90% complete, there are significant differences between the two countries. Last week, before a phone conversation with the Chinese side, Treasury Secretary Steven Mnuchin said, “There are just a lot of complicated issues.” However, he said that Huawei isn’t among the issues. The US is seeking far-reaching concessions from China. For China, the changes are too radical. China thinks that the changes challenge its sovereignty.

Forced technology transfers, intellectual property rights, China’s state subsidies, and the implementation mechanism are the key stumbling blocks in the US-China trade talks. The US wants the trade deal to be legally binding. While China has been willing to lower the trade surplus, it has taken a tough stance on some of the other aspects. China has included Commerce Minister Zhong Shan in the US-China trade talks. Zhong is seen as a hawk.

Caution about US-China trade talks

While resuming the US-China trade talks is positive, investors should be cautious. Over the last 15 months, there have been three trade truces between the two countries. The first two truces didn’t achieve any headway. Several US companies said that the trade war is impacting their earnings. Last year, Apple (AAPL), Amazon (AMZN), Facebook (FB), and Alphabet (GOOG) opposed the tariffs on China.

Big tech companies are also facing an antitrust probe. Earlier in July, Amazon, Facebook, Alphabet, and Apple executives testified before lawmakers. Amazon received a jolt when President Trump said that the administration would take a relook at the JEDI contract. Microsoft is also in the fray for the contract. According to President Trump, companies like IBM (IBM), Oracle (ORCL), and Microsoft complained about the contract. So far, IBM and Oracle have seen an upwards price action of 35.4% and 27.8% this year.

Could Trump waive tariffs?

CNBC also reported that “Longer-term, U.S. officials have suggested they could roll back the tariffs in exchange for Beijing making the deal legally binding.” While China has always maintained that the existing tariffs need to be waived before a trade deal, President Trump wants the tariffs to remain in place for now. Earlier in July, China’s Ministry of Commerce categorically said, “If the two sides are to reach a deal, all imposed tariffs must be removed.” Reportedly, the US-China trade talks broke down in May after China went back on its promise of making the deal legally binding.

USMCA

CNBC reported that USMCA ratification remains a key priority for the Trump administration. So far, only Mexico has ratified the USMCA. Getting the USMCA ratified would be a key political win for President Trump. Ratification would help President Trump before enters the trade talks with China. However, in the USMCA, Democrats want an even deal. Read Why USMCA Ratification is Crucial for President Trump to learn more.

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