G7: call for dialogue between China and the United States
Chinese and Americans on Monday called for dialogue in the hope of resolving their trade war, three days after the announcement of further mutual tariff increases, which are worrying more and more businesses and markets.
Just one week from the planned entry into force of new reciprocal sanctions, Beijing has called for calm and “cooperation”, but its national currency, the yuan, has gone back down, increasing pressure on US trade.
Before leaving Biarritz, where he participated in the G7 summit, US President Donald Trump announced that the United States would resume “very soon” their negotiations with China.
“China called last night […] She said” let’s get back to the negotiating table “so we’ll get back to it […]. We will start negotiating again very soon “, he said.
Mr. Trump did not mention a date, however. During their last negotiation in Shanghai in late July, the two parties had agreed to meet again in September in the United States, but no date has yet been announced.
Chinese Foreign Ministry spokesman Geng Shuang said he was unaware of the conversation Trump was talking about during a press briefing.
For his part, China’s chief negotiator, Liu He, assured that Beijing was ready to “calmly resolve the problem through consultations and cooperation.”
“We are steadfastly opposed to the escalation of the trade war” which is “not good for China, for the United States, for the peoples of the world,” Liu said, quoted by the press financial.
The yuan unscrews again
The trade war between the world’s two largest economies took an even brighter turn on Friday, with China announcing it would raise tariffs on US goods worth $ 75 billion in annual imports, in response to sanctions already announced US commercials.
Washington responded immediately by announcing stronger increases in customs surcharges on Chinese products than expected, due to come into effect on 1 September and 15 December.
President Trump has also strangled the American business community by telling them to stop doing business with China, a threat then mitigated by senior officials of his administration.
In response, Liu said China wants to “welcome investors from around the world, including the United States.”
The US Chamber of Commerce in Shanghai pointed out that Uncle Sam’s businesses could not withdraw from the huge Chinese market, which would only penalize the US economy. “The economic cost (of the trade war) is already considerable,” the House said in a statement.
To add to the worries of US entrepreneurs, the Chinese currency is off sharply down Monday, yielding 0.74% to 7.141 yuan to the dollar, its lowest level since early 2008.
This fall automatically makes Chinese exports cheaper, but on the other hand increases American products on the Asian giant market.
The currency of Beijing had already won in early August shortly after the announcement by Mr. Trump an extension of US tariffs to almost all Chinese products
The yuan is not freely convertible, but tightly controlled by the Chinese government, Washington officially accused Beijing of “manipulating” its currency in order to support its exports.
The impact of such an accusation is limited: it simply means that the United States must enter into consultations with the country at fault.
“The boxing gloves came out on both sides and, in this context, the depreciation of the yuan acts as a shock absorber found against US tariffs,” said Mitul Kotecha, an economist at Toronto-Dominion Bank.
“As long as this decline remains under control and does not lead to capital flight, we can expect further depreciation,” he told Bloomberg.
Asian stock markets were still nervous Monday, Hong Kong losing nearly 2% and Shanghai more than 1%.