Rocky start to US-China talks pushes steel shares higher

US and China begin Comprehensive Economic Dialogue

At a business lunch before the start of bilateral economic talks in Washington, Mnuchin said he hoped China would lift foreign ownership restrictions in its financial services sector to allow more USA participation, and remove barriers to trade in its information and communication technology sector.

Schwarzman, who also is the chairman of Blackstone, a NY private equity firm, said the summit is to "figure out how we can give advice [to respective governments] that is practical - what solutions could be relatively easy".

"It seems there is a target to cut the U.S. trade deficit with China by 50 percent in one year's time".

"The two sides are inevitably linked to each other", he said.

The US has been running a massive trade deficit with China, which reached US$347 billion (S$475 billion) last year, and President Donald Trump had threatened to impose huge tariffs on Chinese goods and label China a currency manipulator, during his election campaign last year.

These include the sale of USA beef in China for the first time in 14 years. Primarily, the United States imports consumer electronics, clothes and machinery while China's imports are mainly raw materials sent to the country for low-priced assembly.

Ross and Mnuchin said the USA position on the China trade relationship would be guided by "the principles of balance, fairness, and reciprocity on matters of trade will continue to guide the American position so we can give American workers and businesses an opportunity to compete on a level playing field". China came in for severe criticism for the trade imbalance by the American Commerce Secretary who said that this was not market influenced.

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One of the possible reasons for the outcome was America's critical stance with regards to China's trade surplus, which stands at £266 billion (£205bn).

Expectations among trade experts are restrained that the first round of talks Wednesday will produce results on long-standing issues with Beijing, such as the massive trade deficit or global overproduction of steel and aluminum. "The Trump administration became dissatisfied and lost a little bit of patience with China on some of these things".

Possible tariffs on big foreign steel exporters, including China, could be potentially in the 20 per cent range, Axios, a USA news and information website launched past year by the co-founder of Politico, reported in late June. While nearly a fifth of China's exports is destined for the US, American firms are addicted to cheap, Chinese-made inputs, which lower their production costs.

He also stressed that China now has 300 million people in the middle-income group and their demand for quality United States goods and services is swelling by the day.

The two sides had a "frank exchange" but failed to agree on most major bilateral trade and economic issues that were important to the United States, a senior US official said on condition of anonymity because he was not authorized to speak publicly. The BIT has seen 33 rounds of negotiations over the last five years, and has been "shelved by the new [Trump] administration". "I would not say it's on the top of our agenda".

The analyst suggested that the Trump administration tried to fix the trade deficit with China by getting Chinese authorities to set specific goals on trade figures demonstrating it does not have much faith in free market.

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