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U.S., China Exchange Jabs as They Gear Up for Trade Talks

Enda Curran

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The mood music heading into this week’s U.S. and China trade talks is sounding ominous, with a couple of fresh developments that won’t likely sooth sentiment around the negotiating table:

The Trump administration is moving ahead with discussions around possible restrictions on capital flows into China, with a particular focus on investments made by U.S. government pension funds, Bloomberg’s Jenny Leonard reports, citing people familiar with the internal deliberations. The U.S. on Monday placed eight Chinese technology giants on a blacklist, accusing them of being implicated in human rights violations against Muslim minorities in the country’s far-western region of Xinjiang. Beijing responded with some tough talk, saying “stayed tuned” for retaliation.  China’s outrage against the National Basketball Association is escalating. China Central Television said it will immediately halt NBA broadcasts, and celebrities and fans said they would skip exhibition games this week in China after the general manager of the Houston Rockets tweeted an image of a slogan supporting Hong Kong’s pro-democracy protesters.

While these issues have their own back story and may not be central to this week’s agenda, they will hardly do much to improve relations either. The sides also may also have different goal posts: Chinese officials are signaling they’re increasingly reluctant to agree to a broad agreement, but President Donald Trump said on Monday his “inclination is to get a big deal.”

Officials from the U.S. and China began working-level preparations in Washington for the main event — high-level talks due to begin Thursday. Chinese Vice Premier Liu He will lead a delegation including Commerce Minister Zhong Shan and central bank governor Yi Gang, according to Xinhua.

How these negotiations play out will be of critical importance for a world economy that is spiraling into a deeper slowdown due in large part to the trade war. If the signals (or tweets) are positive, then it will buoy hope among investors and policy makers that some kind of a near-term deal is possible.

If the talks don’t go well, then the global economy and financial markets may have to assume the brace position with another U.S. tariff-hike deadline just a week away.

Charting the Trade War

The latest figures from the Commerce Department showed the U.S.’s merchandise trade gap with China narrowed in August after exports climbed to a five-month high, but skepticism is growing over any sort of agreement. 

Today’s Must Reads

Chinese inspiration | The European Union is being urged to copy China’s Belt and Road Initiative to better channel the billions of euros in aid it sends to Africa each year. No-deal Brexit tariffs | The U.K. government revamped the tariffs it will levy after a no-deal Brexit following warnings from industry that its earlier plans risked making domestic producers uncompetitive. Worldly view | The World Bank president said the global economic outlook is deteriorating amid Brexit-related uncertainty, trade tensions and a downturn in Europe. Wrong track | This year’s slump for American railroads is getting worse as a slowdown in manufacturing threatens broader weakness in the U.S. economy. Trade boost | South Africa’s president is hopeful a deal that could turn the continent into the world’s largest free-trade zone will boost the country’s sluggish economy.

Economic Analysis

Brace for Brexit | Tariffs are set to challenge U.K. producers and consumers when the country exits the EU. More trouble ahead | German industry did marginally better in August, but the country’s problems aren’t going away.

Coming Up

Oct. 10: German, U.K. trade balance Oct. 10-11: U.S.-China talks in Washington

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To contact the author of this story: Enda Curran in Hong Kong at ecurran8@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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