China Says Trade Officials Staying in Touch on Phase One Deal

LAGOS (Capital Markets in Africa) – China signaled trade talks with the U.S. are on track towards an interim deal after negotiators from both sides spoke by telephone on Tuesday.

The officials “reached consensus on properly resolving relevant issues” and agreed to stay in contact on the remaining points for a so-called phase one pact, China’s Ministry of Commerce said in a statement. The U.S. Trade Representative’s office confirmed a meeting took place but declined to comment on the contents.

China says it has reached “consensus” with the U.S. on what it calls properly resolving “relevant issues.” Beijing also says the two sides have agreed to stay in contact on a potential interim trade deal.

Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin discussed core concerns, according to China’s statement, which didn’t provide further details.

Talks on the limited deal have continued since it was first announced in October, with both sides making concessions recently on issues such as food imports, intellectual property and tech giant Huawei Technologies Co. Liu, China’s chief negotiator, said last week that he was “cautiously optimistic” about concluding a phase one deal, but the lack of a deadline and comments from President Donald Trump and others have led to speculation that talks could extend into next year.

Asian stocks gained Tuesday amid optimism over the talks and a fresh wave of merger and acquisition activity.

If a phase one deal does not materialize before Dec. 15, Trump will have to choose whether to carry out his previous threat to impose 15% tariffs on some $160 billion in imports from China. Relations between the two sides are also complicated by the passage of a bill through the U.S. legislature that supports pro-democracy demonstrators in Hong Kong, and President Xi Jinping has called for an equal agreement.

Officials on the call Tuesday may have discussed tariff removal, agricultural purchases and a review mechanism for the implementation of a potential agreement, Global Times reported, citing an unidentified expert close to the trade talks.

Trump said last week that a trade deal with China was “potentially very close” but it “can’t be like an even deal” because the U.S. is “starting off from the floor” and China is “already at the ceiling.”

“Key is what happens if we do not get a deal by 15 December,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore. “Will the U.S. agree to suspend the tariffs out of goodwill?”

Even if a first-phase deal is signed, it may well skirt more difficult issues such as U.S. concern about Chinese subsidies and protectionism, or attempts to shut out Chinese technology companies from the U.S. market over security threats. Ongoing civil unrest in Hong Kong and China’s actions in Xinjiang are becoming additional points of tension.

Source: Bloomberg Business News