President Donald Trump said the U.S. and China are very close to signing a “big” trade deal that’s expected to see him reduce existing tariffs and delay ones due to take effect on Sunday, sending stocks to new records.
“They want it, and so do we!” he tweeted five minutes after stocks opened in New York.
Trump is due to meet with key trade advisers at 2:30 p.m. at the White House, a person familiar with the negotiations said. His statement Thursday that the U.S. wants a deal soon contrasted with remarks he made earlier this month that suggested he was willing to wait until after the 2020 elections in the U.S. to sign a pact. The S&P 500 Index rallied to a record after Trump’s tweet, and the MSCI All-Country stock index surged to its first record since January 2018.
The U.S. has added a 25% duty on about $250 billion of Chinese products and a 15% levy on another $110 billion of its imports over the course of a roughly 20-month trade war. Discussions now are focused on reducing those rates by as much as half, as part of a phase-one agreement Trump announced almost nine weeks ago.
A phase-one pact is expected to be built largely around a significant increase in Chinese agricultural purchases in exchange for the U.S. delaying a new round of tariffs scheduled to take effect Dec.15 and a reduction in existing levies on Chinese goods.
Officials have also said it will include Chinese commitments to do more to stop intellectual-property theft and an agreement by both sides not to manipulate their currencies. Put off for later discussions are knotty issues such as longstanding U.S. complaints over the vast web of subsidies ranging from cheap electricity to low-cost loans that China has used to build its industrial might.
While the White House gathering may highlight continuing divisions over whether to hit Beijing with a new wave of tariffs, Trump’s tweet suggests he may be willing to forego escalation for now.
Reason to Delay
December tariff round would have more costs than benefits for the U.S.
Officials from the world’s two biggest economies have been locked in negotiations on the phase-one deal since Trump announced it.
The new duties, which are due to go ahead at 12:01 a.m. Washington time on Sunday unless the administration signals otherwise, would hit some $160 billion in consumer goods from China including smartphones and toys.
Before today, Trump’s advisers have sent conflicting signals and stressed that he hadn’t made up his mind on the next steps. Advocates of delaying the tariff increase have argued that continued negotiations with Beijing will enable him to maintain a tough line with Beijing without the economic damage that more import taxes might bring.
The decision facing Trump highlights one dilemma he confronts going into the 2020 election: Whether to bet on an escalation of hostilities with China and the tariffs he is so fond of or to follow the advice of more market-oriented advisers and business leaders who argue a pause in the escalation would help a slowing U.S. economy bounce back in an election year.
Robert Lighthizer, the U.S. trade representative leading the negotiations with China, is in a camp who sees progress in talks and wants them to continue without further escalation, according to people familiar with the discussions. That would set up a push to conclude the talks in January, possibly before a State of the Union address to Congress by Trump.