Ahead of the June G20 meeting, the reopening of talks between the US and China remains a big “if”. US President Trump tweeted ahead of the meeting that an extended talk would take place on the sidelines of the G20 symposium. The markets are pricing in a meeting between Trump and Xi were the two sides agree to continue talks. A breakdown would be disastrous for trading riskier assets, and a positive surprise would allow stocks to soar.
Ahead of the meeting, Treasury Secretary Steven Mnuchin will meet with Chinese officials in Osaka, Japan to lay the groundwork. Lighthizerexpects to speak to his counterparty ahead of the meeting of the two heads of state. He will also join Mnuchin in Osaka before discussions between Trump and Xi take place.
While talks between the US and China appear welcoming the statements and newspaper editorials from each country are making clear that the coming discussions on trade between the US and China need to be approached in a specific way. From China’s perspective, they don’t want to be bullied. If the feel Trump is trying to drive a deal down their throats through tough talk, Xi will be forced to take a step back to show his people he cannot be bullied. There are three keys to the coming talks, which include the removal of additional tariffs, an agreement on trade purchases and a balanced text.
Ahead of the Meeting Xi Meets Kim
Xi Jinping, arrived in Pyongyang to meet Kim Jong Un, North Korea’s dictator, ahead of the meeting with Trump. The two are expected to discuss North Korea’s nuclear program. Xi is expected to ask Kim to refrain from provocations and to restart disarmament talks. If he is successful, he will have a leverage card to play against Trump.
The Tariffs Hit India
The US recently removed India from favored trade nation status, which increases discounts it receives on exports to the US. In retaliation, India will impose higher retaliatory tariffs on 28 US products including almonds, apples and walnuts.From June 5, President Trump scrapped trade privileges under the Generalized System of Preferences for India, the biggest beneficiary of a scheme that allowed duty-free exports of up to $5.6 billion. India sees the situation as unfortunate and said they would do what needs to be done in its national interest. A year ago, India had threatened to increase import taxes on several products after Washington’s refusal to exempt it from higher steel and aluminum tariffs. India repeatedly delayed raising tariffs as the two nations engaged in trade talks.
India implemented the imposition of retaliatory duties on 28 specified goods originating in or exported from US while preserving the existing rate for these goods for all other countries.
Higher Indian tariffs on US goods could impact the relationship between the US and India. US Secretary of State Mike Pompeo said the United States was open to dialogue to resolve trade differences with India.