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US and China likely to finalise agreement after nine-month trade war; optimism over Trump-Xi talks boost global stock markets

President Donald Trump on Friday said the United States and China are close to entering into a trade agreement and something very "monumental" could be announced in next four weeks. He also said that a summit meeting with Chinese President Xi Jinping would take place only if a deal is finalised.

Top Chinese and US officials are meeting to reach an agreement after the world's two biggest economies entered into a trade war and imposed tariffs on more than $360 billion in two-way trade.

Trump has been accusing China of indulging in unfair trade practices, like the theft of US technology and massive state intervention in markets, contributing to the huge trade deficit amounting to $375 billion. Last week, negotiators from both the countries met in Beijing.

 US and China likely to finalise agreement after nine-month trade war; optimism over Trump-Xi talks boost global stock markets

File image of US President Donald Trump. AP

"The deal is coming along really well. We'll probably know over the next four weeks. It may take two weeks after that to get it papered, but I really think that, over the next fairly short period of time, we're going to know," Trump told reporters in the Oval Office of the White House during his meeting with the visiting Chinese vice premier Liu He.

"It's looking very good. A lot of really good things have been negotiated and agreed to. I would really say, and I say it again, a lot of the most difficult points that we didn't think we could ever do or we wouldn't agree to, on both sides have been agreed to," he said.

The two sides, he said, have negotiated some of the toughest points, but there are still some ways to go. "I think we have a very good chance of getting there". Responding to a question if he was looking forward to meet Xi, Trump said the summit would take place only if the trade deal is finalised.

"I look forward to seeing President Xi. It will be here. If we have a deal, then we're going to have a summit. If we don't have a deal, we're not going to have a summit. But there's a very good chance that we'll have the summit," said the US President.

When asked what is coming in the way of the deal, he said "It is enforcement. We have to make sure there's enforcement. I think we'll get that done. We've discussed it at length. I think we're going to get that done".

"We're getting very close to making a deal. That doesn't mean a deal is made, because it's not, but we're certainly getting a lot closer. I would think within the next four weeks or maybe less, maybe more — whatever it takes — something very monumental could be announced," the US president said.

Chinese vice premier Liu said that the two countries have made great progress. "I do think that because we got direct guidance by two great President Xi and President Trump," he said. Senate Finance Committee Ranking member Ron Wyden in a statement asked for a strong trade deal with China.

"We've had nearly two decades of broken promises from China. Any deal that fails to address the core trade cheating by China — theft of intellectual property, forced tech transfer and state-owned enterprises — will be a loser for American workers. Donald Trump must not settle for a short-term political deal that doesn't include real, enforceable ways to hold China accountable for its promises," he demanded.

US tariffs on Chinese products final sticking point

A final sticking point appears to be when and how Washington will agree to lift the steep tariffs it has placed on more than $250 billion in Chinese imports. Last month, Trump said the tariffs would stay in place for "a substantial period," although whether this would apply to both tranches of goods subjected to the new duties was unclear.

US Trade Representative Robert Lighthizer has said tariffs offer crucial leverage should Beijing backslide on its commitments. Gary Clyde Hufbauer, a former US trade official and senior fellow at the Peterson Institute for International Economics, said that lifting the tariffs too early could encourage criticism from Democrats that he had gone soft in the negotiations.

"The White House response to this drama is to keep the tariffs and only to slowly lower the rate as the Chinese fulfill their commitments," Hufbauer told AFP. "The Chinese strategy is to have them get rid of it," he said. "My guess is that something in between will be in the compromise."

In February, Trump announced he would complete any deal himself at a "signing summit" with Xi later in March but the date has repeatedly slipped further into the year as the two sides continued to haggle.

Investors optimistic about talks of trade agreement

Optimism about a deal has helped boost global stock markets for much of the start of 2019, with investors seemingly less concerned about the contents of any deal than the mere fact that the world's two top economies could soon end their skirmishes.

Analysts say any agreement is likely to include banner announcements that China has agreed to increase purchases of American commodities like soybeans and fuel.

This could perversely serve to give Chinese state enterprises a greater market role while making US exporters more reliant on the Chinese government's purchasing decisions — both possibly contrary to US objectives and interests.

William Reinsch, a trade expert at the Center for Strategic and International Studies and former Commerce Department official for exports, pointed to Beijing's boycott of US soybean exports last year. American producers could struggle to fill major new orders announced by Beijing, he said.

"The only way they can buy every bean is if we stop selling to everybody else and that puts us in an enormous position of vulnerability," he said.

Lawmakers credit Trump with demanding control of fentanyl

Senator Lamar Alexander said that Trump deserves great credit for asking Xi to control all forms of fentanyl. Fentanyl is an opioid used as a pain medication and together with other medications for anesthesia. It is also used as a recreational drug, often mixed with heroin or cocaine.

"China's decision to control all forms of fentanyl is the single most important thing that could be done to reduce flow of fentanyl in the US," he said. Chinese regulators have announced that a wider range of fentanyl derivatives would be declared controlled substances in China on 1 May.

Meanwhile, a bipartisan group of Senators introduced the Fentanyl Sanctions Act — the first-ever fentanyl sanctions bill — that would apply pressure on the Chinese government to honour their commitment to make all fentanyl illegal and provide the US with more tools and resources to go after illicit traffickers in China, Mexico and other countries.

The legislation would require imposition of sanctions on drug manufacturers in China who knowingly provide synthetic opioids to traffickers, transnational criminal organisations like those in Mexico who mix fentanyl with other drugs and traffic them into the US and financial institutions that assist such entities.

With inputs from PTI and AFP

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Updated Date: Apr 05, 2019 11:29:27 IST

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