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U.S., China Move Closer to Trade Deal Despite Harsh Rhetoric

04 December 2019

Another Chinese government official who declined to be identified said it may take a very long time for Washington and Beijing to reach a deal if they can not find a way to strike a deal while "the iron is hot". "But they want to make a deal now, and we'll see whether or not the deal's going to be right", Trump told reporters in London on Tuesday, triggering a sharp fall in stocks and a flight to government bonds.

Bloomberg reported on Wednesday that Washington and Beijing are "moving closer" to agreeing on how much tariffs would be rolled back in an initial trade deal despite the Hong Kong and Xinjiang issues, citing people familiar with the talks.

The people, who asked not to be identified, said that U.S. President Donald Trump's comments Tuesday downplaying the urgency of a deal shouldn't be understood to mean the talks were stalling, as he was speaking off the cuff.

On Tuesday, Trump also derided recent comments made by French President Emmanuel Macron - in which Macron described the "brain death" of North Atlantic Treaty Organisation due to lack of American support - as "very very nasty" and "very disrespectful".

Trump's comments come as the US and China remain locked in a trade war with both countries imposing tariffs on each other.

Heightening concern that negotiations for a near-deal will drag out was a report from Chinese state media indicating the government would soon publish a list of "unreliable entities" that could lead to sanctions against USA companies. Ahead of the opening bell, futures were pointing to a higher open but comments from President Trump in London at a North Atlantic Treaty Organisation conference put the markets on its heels.

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Trump said he has "no deadline" for the trade talks, indicating that he does not mind if the negotiations become protracted.

The talks had appeared to survive Beijing's anger at United States legislation backing Hong Kong's protesters, but the latest flare-up has given markets the jitters because traders had priced in an agreement.

Investors were hoping for a new deal since new tariffs on Chinese goods start December 15th, according to the AP.

Trump has also threatened Argentina, Brazil and France with tariffs. Trump's top trade negotiator, Robert E. Lighthizer, said the levies came in response to a French digital services tax that the USA determined is discriminating against American Internet companies.

Tucked between those pronouncements was a widely overlooked statement that the USTR was contemplating increasing the scope of tariffs levied against the European Union over illegal Airbus subsidies after a World Trade Organization ruling. Underpinning his actions are an apparent belief that his import taxes are having a positive effect.

A steady string of global firms, including Apple, Dell, Google, Amazon, toymaker Hasbro have announced plans to shift part of their US bound production from China to neighboring countries, such as Vietnam, Malaysia, and Bangladesh.

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Among the biggest risks to emerge was a possible trade conflict with Europe.

"If the USA follows through with the threat of tariffs on December 15, that is definitely a re-escalation, and China will retaliate", Lu said.

On Tuesday, the European Union refrained from an immediate reaction to the French tariffs, saying in a statement that the 28-nation bloc "will act and react as one and it will remain united" while "coordinating closely with the French authorities with the next steps".

AK Steel Holding rose 6.9%, U.S. Steel about 3.8%, and Steel Dynamics went up 1.4%. The dollar weakened against a basket of key trading partners' currencies. "Dollar is very strong relative to others", he tweeted.

-With assistance from Shawn Donnan, Miao Han, Sofia Horta e Costa, Dandan Li and Jordan Fabian.

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U.S., China Move Closer to Trade Deal Despite Harsh Rhetoric