Trump cancels China talks, raising questions about trade deal

Washington

US President Donald Trump said he called off last weekend's trade talks with China, raising questions about the future of a trade deal that is now the most stable point in an increasingly tense relationship. "I cancelled talks with China," Mr Trump said on Tuesday in Yuma, Arizona. "I don't want to talk to China right now."

The phase-one trade deal, which came into force in February, had called for discussions on implementation of the agreement every six months. Chinese Vice Premier Liu He was supposed to hold a video conference call with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, but it was postponed indefinitely.

On Wednesday, Chinese Foreign Ministry spokesman Zhao Lijian deferred comment to the "competent department" when asked about Mr Trump's remarks on the trade talks.

Chinese stocks slumped, led by biotech shares, amid growing concern over tensions between the world's biggest economies. The CSI 300 fell 1.5 per cent at the close, the largest decline in nearly a month, while the tech-heavy ChiNext gauge slumped 3.3 per cent.

Talks between the US and China continue regularly at lower levels, according to Greg Gilligan, chairman of the American Chamber of Commerce in China. While the purchases by China could be happening more quickly, "there is absolutely commitment and progress that's occurring" he said on Wednesday.

"I think both sides recognise that this is really the glue that is holding the relationship together. There's not an awful lot of other channels of communication that are working well," Mr Gilligan added. "So that's a reason for some optimism in an otherwise pretty bleak scenario in the larger relationship."

While China is making many of the structural changes it promised on issues such as intellectual-property protection, its purchases of US goods are well below where they need to be to meet promised targets, and there's almost no chance they can be fulfilled now with the damage Covid-19 has done to the global economy.

A collapse of the deal risks leading to a return of the tit-for-tat tariff war that hurt trade and companies around the world. Addressing whether the US would pull out of the phase-one deal, Mr Trump replied: "We'll see what happens."

Terminating the deal would require a written notification and take effect 60 days later, unless both parties agree on a different date. The talks never made it on to any official public calendar in Washington or Beijing, but the South China Morning Post reported that they were set for last Saturday.

Mr Trump has stepped up pressure on China over everything from democracy in Taiwan and Hong Kong to popular apps WeChat and TikTok as he looks to make up ground in the polls before the November election. BLOOMBERG