Trump asks Cabinet to draft possible trade deal with China

US PRESIDENT DONALD TRUMP.
US PRESIDENT DONALD TRUMP.PHOTO: AGENCE FRANCE-PRESSE

Move follows phone call between the two countries' leaders; news prompts stocks in China and HK to surge

WASHINGTON • US President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping at the Group of 20 (G-20) nations summit in Argentina later this month, and has asked key US officials to begin drafting potential terms, according to four people familiar with the matter.

The push for a possible deal with China was prompted by Mr Trump's telephone call with Mr Xi on Thursday, the people said, requesting anonymity to discuss internal deliberations.

Afterwards, Mr Trump described the conversation as "long and very good", and said in a tweet that their discussions on trade were "moving along nicely".

Mr Trump asked key Cabinet secretaries to have their staff draw up a potential deal to signal a ceasefire in an escalating trade conflict, the people said, adding that multiple agencies are involved in the drafting of the plan.

It was unclear if Mr Trump was easing up on US demands that China has resisted.

At a campaign rally in Missouri on Thursday, Mr Trump said that "they want to make a deal".

"He wants to do it," Mr Trump said of Mr Xi. "They all want to do it."

WILLING TO DO A DEAL

They want to make a deal... He wants to do it. They all want to do it.

US PRESIDENT DONALD TRUMP, at a campaign rally in Missouri (above), on China and President Xi Jinping's view of a possible trade deal with the US.

The news prompted stocks to surge in Hong Kong and China, while the offshore yuan jumped as much as 0.5 per cent for the biggest two-day gain since August. The Hang Seng Index rose 4.2 per cent, the biggest gain since 2011, and the Shanghai Composite Index climbed 2.7 per cent, posting a fourth day of gains for its longest winning streak since February.

US-China talks have made little progress since May, when Mr Trump put a stop to a deal that would see China buy more energy and agricultural goods to narrow the trade deficit.

In Beijing, that was seen as an insult to Mr Xi, who sent a personal emissary to Washington for the negotiations, and cemented a view that Mr Trump's real goal was to thwart China's rise.

The telephone conversation on Thursday was Mr Trump and Mr Xi's first publicly disclosed call in six months.

Both sides reported that they had constructive discussions on North Korea and trade, with Chinese state media saying that Mr Trump supported "frequent, direct communication" between the presidents and "joint efforts to prepare for" the planned meeting on the sidelines of the G-20 summit, which is scheduled to take place from Nov 30 to Dec 1.

Mr Xi told CCTV news yesterday that he hoped China and the US would be able to promote a steady and healthy relationship, and that he was willing to meet Mr Trump in Argentina.

 
 
 

"The two countries' trade teams should strengthen contact and conduct consultations on issues of concern to both sides, and promote a plan that both can accept to reach a consensus on the China-US trade issue," Mr Xi said.

The possible warming of relations comes after months of es-calating tensions over trade that are threatening to spill into other areas of disagreement, including freedom of navigation in the South China Sea.

But analysts were mixed on the significance of Mr Trump's latest move, with some viewing it as a positive sign of a breakthrough, and others seeing it as a ploy to boost market sentiment ahead of midterm elections next week.

"I don't buy the story for a second," said Mr Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. "This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him and then have someone to blame when the deal then falls through."

Ms Tuuli McCully, head of Asia-Pacific economics at Scotiabank in Singapore, called the news "encouraging".

It "likely reflects the fact that businesses in the US are starting to feel the impact of the trade conflict through higher prices and squeezed margins", she said.

Mr Trump's posture towards China has been watched closely by investors, who are looking for the possibility of tensions cooling.

"If a Trump-Xi deal at the G-20 summit can set the broad framework for renewed bilateral trade negotiations, it may help the global trading system avert the abyss of an escalating US-China trade war in 2019," said Mr Rajiv Biswas, Asia-Pacific chief economist of IHS Markit in Singapore.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on November 03, 2018, with the headline 'Trump asks Cabinet to draft possible trade deal with China'. Print Edition | Subscribe