Result of US-China talks: Short-term relief, long-term risks

Result of US-China talks: Short-term relief, long-term risks

The ZTE talks occur after the US and China over the weekend suspended plans to impose tariffs on as much as $200 billion in each other's goods, pulling back from the brink of a trade war.

The biggest immediate beneficiary appeared to be China, which won a reprieve from threatened tariffs on $50 billion of its exports to the United States as well as a lifeline for ZTE Corp, China's second biggest telecom equipment maker whose existence had been threatened by USA sanctions.

"We are not out of the danger zone yet", said Nick Marro, a China analyst with the Economist Intelligence Unit.

In the short run, a truce in the trade conflict between the United States and China has lightened tensions, halted the immediate threat of US tariffs on China's goods and cheered stock markets.

"The president and Secretary Mnuchin, what they are doing sends a unsafe signal to businesses around the world that the United States is willing to forgive sanction violations or reduce penalties", Schumer said.

Industrial companies and banks made some of the biggest gains, while technology stocks also rose.

Economists at Morgan Stanley estimated that exports of USA agricultural products, primarily beef, and energy, mostly liquified natural gas, could add between $60 billion and $90 billion to sales to China over a period of years.

The trade talks between the USA and China, which kicked off last week, are reported to be fruitful.

Early Monday the president tweeted that, in order to wind down an escalating trade feud between the two countries, China would buy more American products in order to reduce the trade deficit between the two nations. Trump wrote on Twitter on Monday.

The president's trade representatives blitzed the business networks on Monday morning trying to tamp down expectations however for a potential deal while Trump was on Twitter talking up one

The second person said China may also eliminate tariffs on USA agriculture products it assessed in response to US steel duties as a part of the deal, and that ZTE could still be forced to replace its corporate leadership, among other penalties.

Questions also remained over the administration's handling of ZTE. Last week, Trump posted a tweet saying he was working with Chinese President Xi Jinping to help ZTE "get back into business, fast".

Trump agreed to allow ZTE to stay in business, and the United States and China struck a deal to drop their tariff threats while they worked on a wider trade agreement, Mnuchin said on Sunday. An 2017 agreement called for it to pay as much as $1.2 billion and penalize the workers involved, in what was the largest criminal fine for the U.S. Justice Department in an export control or sanctions case.

Treasury Secretary Mnuchin predicted a big increase - 35 percent to 45 percent this year alone - in farm sales to China and a doubling in sales of energy products to the Chinese market.

China has frequently argued that the trade imbalance can be fixed by the USA lifting strict export curbs on high-technology goods. Negotiations are now behind closed doors, so it's unlikely we'll learn much more about this deal before it is settled. Treasury Security Steven Mnuchin said Monday those issues "are part of our framework".

"If the governments of the two countries reach a good agreement and results that are acceptable to both, they should stick to the agreement".

Schumer fired back: "When it comes to being tough on China trade, I'm closer to Trump than Obama/Bush".

FILE PHOTO: Containers are seen at the Yangshan Deep Water Port in Shanghai, China April 24, 2018.