The latest round of U.S.-China trade talks resumed today in Washington. The Trump administration’s March 1 deadline continues to walk nearer–although everyone on Wall Street expects that President Trump will decide good progress has been made and will extend the deadline without imposing 25% tariffs on $250 billion in Chinese exports to the United States.
But it would be nice if the leaks from the negotiations, when they said anything at all concrete, mentioned something other than huge structural impediments to a deal.
Today’s leak, for example, focused on the U.S. request for a “Memorandum of Understanding” in which China would pledge to keep the value of the yuan steady. The U.S. worry is that China could push the yuan lower to offset the effects of higher tariffs on Chinese goods.
As a negotiating point asking for yuan stability isn’t exactly unprecedented. The U.S. insisted that a pledge that Mexico and Canada would not engage in currency devaluations be inserted in the new version of NAFTA now awaiting Congressional approval. And the Obama administration had included similar language as part of the negotiations for a Trans-Pacific Partnership trade deal.
And since tariffs look likely to be the key enforcement tool in any U.S.-China trade agreement, making sure that China can’t circumvent higher tariffs by devaluing the yuan would seem critical.
But the mention of the currency issue today served to remind financial markets, which had been increasingly optimistic in recent days that a trade deal would be struck and a tariff war averted, of just how many big and thorny issues remain to be resolved in these talks.
