Welcome to the 257th edition of Trade War.
There’s been a wild cacophony of mixed messages on a possible trade deal: while Trump insists the US and China are talking, Beijing has flatly denied it. And as Treasury Secretary Scott Bessent talks up the possibility of an imminent big agreement, China threatens trading partners who might side with Washington.
In a wide swing from optimism to gloom, Bloomberg News reports that Beijing may start exempting some US goods from tariffs, then China cancels a record order of American pork.
The Politburo meeting calls for China to “fully prepare” for trade shocks. And US popularity falls quickly in the new Trump era, including in Asian allies South Korea and Taiwan.
Notable/In depth ~
China’s next generation of leaders could pull country in a more liberal direction, predicts Harvard Kennedy School historian Rana Mitter
Why the White House tariff strategy won’t rein in China
And a societal side effect of the trade war: China’s population likely to decline further, as rising unemployment slows marriages, says demographer
“From Big Sky Country to Beijing”
First, I would like to highlight an upcoming talk on U.S.-China trade and business relations. The speaker will be Goldman Sachs David Willard with me as moderator. It will be held on Thursday May 1 at 9 pm ET and hosted by the University of Montana’s Mansfield Center.
We will be discussing how American businesses are assessing the current risks of engaging with the Chinese market and what economic opportunities there still are for the U.S. and China to engage constructively. If you can make it, please sign up in this link.
We’re talking, says Trump; no we’re not, says Beijing
Welcome to the wild cacophony of mixed messages on a possible trade deal. First the basics: are the two sides even talking? While Trump insists the U.S. and China are involved in negotiations, Beijing has flatly denied it.
On Tuesday, Trump said tariffs would “come down substantially” and promised to “be very nice” to Beijing. “I think we’re going to live together very happily,” he added.
“None of that is true. For all I know, China and the U.S. are not having any consultation or negotiation on tariffs, still less reaching a deal,” said Foreign Ministry spokesperson Guo Jiakun on Thursday, during a regular press briefing.
“If a negotiated solution is truly what the U.S. wants, it should stop exerting extreme pressure, stop threatening and blackmailing China, and seek dialogue based on equality, respect and mutual benefit,” Guo added.
“Any claims about the progress of China-U.S. trade negotiations are groundless as trying to catch the wind and have no factual basis,” Commerce Ministry spokesperson He Yadong said in a briefing the same day.
Doubling down on his assertion that talks are ongoing, Trump said Thursday “they had a meeting this morning . . . It doesn’t matter who ‘they’ is.”
Talks with China are underway, Trump said again in an interview with Time released Friday, and again that morning, as he left the White House to attend the funeral of Pope Francis at the Vatican. Asked whether he has spoken with Xi Jinping since he announced his tariff plan, Trump told reporters: "I don't want to comment on that, but I've spoken to him numerous times."
“Opportunity for a big deal” on trade, says Bessent
Treasury Secretary Scott Bessent has been talking up the possibility of the U.S. and China reaching a substantial trade agreement.
“There is an opportunity for a big deal,” he said at the Institute of International Trade and Finance in Washington, D.C. on Wednesday.
“If they want to rebalance, let’s do it together,” Bessent added, part of a regular refrain in his recent comments on a possible trade deal. “This is an incredible opportunity.”
Bessent also criticized the World Bank for continuing to lend to countries including China after they reach a more advanced economic status.
“The World Bank continues to lend every year to countries that have met the criteria to graduate from World Bank borrowing,” Bessent said. “There is no justification for this continued lending. It siphons off resources from higher priorities and crowds out the development of private markets.”
“Going forward, the Bank must set firm graduation timelines for countries that have long since met the graduation criteria. Treating China—the second-largest economy in the world—as a ‘developing country’ is absurd.”
“While it has been at the expense of many Western markets, China’s rise has been rapid and impressive,” he said. “If China wants to play a role in the global economy commensurate with its actual importance, then the country needs to graduate up.”
China cold to Trump overture
My take from Thursday’s live video:
“President Trump has repeatedly hinted that a deal is near. He has suggested that the two sides are in talks. He said that he will be good to China and that tariffs will come down substantially. China, for its part, has been, well, pretty cold.”
“The U.S. is the one that is blinked first and China is not showing much in return right now in terms of this overture from the Trump administration. I do still think a deal will happen eventually, I continue to believe that, but it may not be on the terms or as quickly as the Trump administration would like to see it happen.”
And thoughts on Bessent:
“Treasury Secretary Scott Bessent has been working overtime to try to put out this idea that it's the Chinese that have been forced to come to the negotiating table, and that's because of this need for rebalancing. As he's said on numerous occasions, the Chinese know that they need to rebalance. We know it. And therefore, the suggestion being this has brought China to the negotiating table.”
“China does need to rebalance its economy. It isn't sustainable long-term. They know they need to rebalance it. But if a deal does happen and if China does start to talk to the U.S., it's not going to be because China somehow was forced to do so because of the need to rebalance.”
You can watch the whole thing below, if you missed it Thursday:
Live with Dexter Roberts
Thank you to everyone who tuned into my live video! Join me for my next live video in the app.
China threatens countries that side with US
China has threatened trading partners considering joining forces with Washington to counter its economic heft.
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