U.S, China move to halt escalation of trade war

The U.S and China have started talks on the current tariff war which had hit both countries in recent weeks.

The trade negotiation opened on Wednesday to avert further confrontations, and prevent new round of tariffs.

US Treasury’s David Malpass,
undersecretary for international affairs, is leading two days of talks
with China’s Vice Commerce Minister Wang Shouwen, and Chinese Vice
Finance Minister Liao Min.

The talks are due to continue Thursday morning, but the Treasury has not specified what topics are being discussed.

Trump said earlier this week that he was not expecting much from the talks.

“We are a country that has been ripped
off by anybody and we are not going to be ripped off anymore,” Trump
said at a campaign rally in West Virginia on Tuesday.

“It has to be a two-way street. We only have one-way streets not only with China but everybody.”

 The Federal Reserve has warned that escalation poses a serious economic risk.

These are the first formal discussions
with China since June on the spiralling and multifaceted trade war
between the world’s two largest economies.

Meanwhile, US and Mexican officials this
week are expected to wrap up weeks of discussions on the rewrite of the
North American Free Trade Agreement that could pave the way for Canada
to re-join the talks and move to a final agreement.

President Donald Trump has pushed
aggressive trade actions to lower the US trade deficit that he equates
with stealing from Americans.

But US trading partners have retaliated aggressively, which is hurting American farmers, manufacturers and consumers.

US businesses have become increasingly
concerned about the tariffs that are raising prices for manufacturers
and could hurt the economy, although the prospect of a negotiated
solution buoyed Wall Street this week.

However, Federal Reserve officials warned
that “an escalation in international trade disputes was a potentially
consequential downside risk for real activity,” according to the minutes
of the July 31-August 1 policy meeting.

A large-scale and prolonged dispute
likely would adversely impact business sentiment, investment spending
and employment, the officials warned, and boost prices, which would
“reduce the purchasing power of US households.”

Even as the talks begin, another $16
billion in Chinese goods will face new US tariffs starting Thursday at
12:01 am (0401 GMT), completing the first round of $50 billion in
products targeted in the dispute over what US officials
say is the rampant theft of American technology.

China has said it will react immediately
with tariffs on the same amount of US goods, targeting iconic products
like Harley motorcycles, bourbon and orange juice, among hundreds of
others.

And still pending are the possibility for
new duties on another $200 billion in Chinese goods, which are the
subject of public hearings this week, as well as Trump’s proposed 25
percent taxes on all auto imports to protect the
US industry.

But Commerce Secretary Wilbur Ross said China will not be able to continue to retaliate at the same pace as the United States.

“Naturally they’ll retaliate a little
bit. But at the end of the day, we have many more bullets than they do.
They know it,” Ross said on CNBC. “We have a much stronger economy than
they have, they know that too.”

Trump, who has threatened to target all
$500 billion in goods the US imports from China, has made that same
point, noting that Beijing cannot continue to retaliate in kind since it
imports less than $200 billion a year in American
goods.

Thousands of large and small companies
and industry groups have urged the Trump administration to reconsider
the tariffs which some say could put them out of business.

But so far the Trump administration has
largely been deaf to the complaints, as only a handful of product lines
have been shielded from the punitive duties.

The administration already was forced to
announce a $12 billion aid program for farmers hurt by the trade wars,
as US agricultural products, like soybeans, were an easy target for
China and others.

NAFTA rewrite

Efforts to revise NAFTA seem a bit more
hopeful, after US Trade Representative Robert Lighthizer told Trump last
week he hoped to get a breakthrough on the issues with Mexico.

Mexico’s Economy Minister Ildefonso
Guajardo said on Wednesday they could be finalized “in the next two
hours or next two days,” according to press reports.

He told reporters after the meeting that discussions will continue on Thursday.

Canada’s Foreign Minister Chrystia
Freeland told reporters on Wednesday that she was “encouraged” by the
news Mexico City and Washington are closer to working out their
bilateral issues, and was looking forward to rejoining the
talks.

“I’ve been in close touch with both the US and Mexico this week,” she said on the sidelines of an event in British Columbia.

“What we’ve agreed with the US and Mexico
is, once the work on those bilateral issues is done, then Canada is
looking forward to joining the negotiation and a swift conclusion of the
NAFTA negotiations.”

The three countries have been negotiating
for a year to salvage the trade pact that Trump says was a “disaster”
for the United States.