United States tariff increase on $200B of Chinese imports takes effect

Chinese President Xi Jinping and U.S. President Donald Trump attend a welcoming ceremony Nov. 9 2017 in Beijing China. Trump and Jinping are close to finalizing a trade deal between their two nations

Robert Lighthizer, the chief usa trade negotiator, is scheduled to meet at 5pm on Thursday (9am Friday, NZT) with Chinese Vice Premier Liu He to continue negotiations aimed at a comprehensive trade deal.

Chinese vice premier Liu He, US trade representative Robert Lighthizer and US treasury secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume talks on Friday. He continues to claim that the money generated by tariffs is lifting the US economy.

This round is the eighth round of talks since US President Donald Trump and Chinese President Xi Jinping agreed on a 90-day truce previous year after months of bitter trade war. Trump repeated a threat on Thursday to impose new 25 per cent tariffs on US$325 billion of Chinese imports, which aren't now covered, saying that his administration has started preparing the paperwork.

In comments to Chinese state media upon arriving in Washington, Liu said that hiking tariffs "is very disadvantageous to both parties".

Though most economists say such a broadening of the trade conflict would inflict serious damage on both economies, the president insists his tariffs helped the USA economy grow at a 3.2 per cent annual rate in the first quarter.

"We should not hurt innocent people", Liu told CCTV.

European stock futures point to gain of 0.5-0.6 percent in European stocks, which closed on Thursday before Trump's comments about receiving a "beautiful" letter from Chinese President Xi Jinping. But regulators are running out of US goods for penalties due to the lopsided trade balance.

This week's setback was unexpected.

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Before this week's acrimony, both sides said negotiations were making progress, which helped to stabilize financial markets. They wouldn't identify the specific issues involved. "We have to deal with the licensing agreements, joint ventures, the general theft of technology and intellectual property so, it's more than just rebalancing the trade deficit". Now he's publicly playing hardball with the world's second largest economy by threatening new tariffs that will kick in Friday, as if striking a unilateral deal is all the American worker needs in the years ahead.

The S&P 500 retreated for a fourth day on Thursday, falling into its worst stretch of losses this year as the deadline for the U.S.to raise tariffs on Chinese goods approached.

China on Friday (May 10) said it "deeply regrets" the United States' decision to increase tariffs on US$200 billion (S$273 billion) worth of Chinese goods to 25 per cent from 10 per cent, adding without elaborating that it would take necessary countermeasures.

China's Commerce Ministry said Wednesday that Beijing will retaliate if the USA actually imposes the tariffs.

A passerby walks past in front of a stock quotation board outside a brokerage in Tokyo, Japan, May 10, 2019. The U.S. trade representative views changes to China's laws as essential to verifying compliance after years of what U.S. officials have called empty reform promises. "It has to come from within China and a real desire to change its system".

The President's declaration that Beijing is looking to strike an agreement also followed an earlier tweet, in which Trump claimed to know why China backed away from the negotiating table. The men were detained in apparent retaliation after Canada arrested a Chinese executive at the request of the United States; the woman faces fraud charges in America.

The International Monetary Fund also repeated its warning on Thursday that the trade battle between the world's top economies was a "threat" to global growth.

The dollar index fell 0.21 percent, with the euro up 0.25 percent to $1.1219.

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