Jostling for Position Ahead of U.S.-China Trade Talks

(Bloomberg) --

With the next round of U.S.-China trade talks still several weeks away, there’s a public perception battle raging that’s part noise, part positioning and it’s happening in unlikely places.

A few prominent messages have landed in the echo chamber between Wall Street and the White House this week. One was an interview the founder of Huawei had with New York Times columnist Thomas Friedman, who writes about Ren Zhengfei’s surprising offer to defuse the trade war. The Wall Street Journal published an op-ed by billionaire investor George Soros, who urges President Donald Trump not to “sell out” the U.S. for a trade deal that goes easy on Huawei.

A war of words elsewhere is getting a little nastier. The Communist Party’s flagship newspaper took aim at one of Washington’s most prominent China hawks, saying Peter Navarro was spreading “lies.” The U.S. Agriculture Department’s top trade official called Chinese President Xi Jinping a “communist zealot.” Bluster even emerged in South Africa, where China’s ambassador there took out a half-page ad in local newspaper to attack Trump’s stance on global trade as the “winner-takes-all law of the jungle.”

The name-calling does little to boost chances of a trade deal and reflects a hardening of positions on both sides. More substantive developments also suggest the two camps remain separated on thorny issues as public pressure mounts in the U.S. for some sort of truce:

• Trump is considering an executive order to crack down on shipments of fentanyl and counterfeit goods, a move aimed in part at pressuring China to help the U.S. combat its opioid epidemic.
• China on Wednesday announced a range of U.S. goods to be exempted from 25% extra tariffs put in place last year. But it didn’t lift charges on major agricultural items like soybeans and pork.
• U.S. companies on the front lines of the trade war are increasingly pessimistic about Trump’s strategy. Of the 333 members taking part in an annual survey by the American Chamber of Commerce in Shanghai, 75% said they opposed the U.S. using tariffs, up from 69% a year ago.
• Trump’s economic approval rating has dipped to 46% from 51% in July, as the majority of Americans fear a recession in the next year, a new Washington Post-ABC News poll found just after the Sept. 1 tariffs took effect. The survey showed how an asset for Trump — a solid economy — risks becoming a liability.

So while global markets enjoy a few days of relative calm with no fresh trade bombshells, the latest signals from the front lines aren’t supporting the case for optimism either.

Charting the Trade War

It has been more than a decade since the financial crisis wreaked havoc on economies around the world, but many countries are less capable of absorbing shocks now than they were back then. Of the 31 economies tracked by a new gauge from the Swiss Re Institute and the London School of Economics, about 80% had lower resilience scores in 2018 compared to 2007.

Today’s Must Reads

• India-China tension | A dispute between the world’s most populous countries is holding up a pan-Asian trade agreement encompassing nearly a third of all global trade.
• Seeking relief | South Korea will file a complaint with the WTO against Japan’s “discriminatory” export curbs on key materials used by its neighbor’s chip and display makers.
• Hong Kong gateway | A group of U.S. senators told the Trump administration they’re concerned export controls may not prevent China from getting sensitive technology through Hong Kong.
• Big appetite | China probably will keep loading up on Uruguayan beef through the end of 2020 as the Asian nation deals with the fallout of African swine fever, a big meat packer says.
• Rival pact | Serbia’s plan to join a Russian-led economic union is drawing ire from the European Union, which the Balkan nation says it wants to be part of.

Economic Analysis

• Flashing red | Asian bellwether registers a ninth straight decline as South Korea’s export rout continues.
• New sheriff | EU trade chief Phil Hogan to try to minimize post-Brexit disruptions.

Coming Up

• Sept. 13-15: India trade balance
• Sept. 13: Euro zone trade balance
• Sept. 16: Indonesia trade balance
• Sept. 18: Japan, Italy trade balance

--With assistance from Bryce Baschuk.

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

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