Despite rumors and reports that “phase 1” of the trade deal between the U.S. and China is progressing nicely, the negotiations seem to have taken a nosedive, with U.S. President Donald Trump threatening higher tariffs on Chinese goods if a deal isn’t reached. President Trump made the threats during a Cabinet meeting on Tuesday. Rumors had been circulating that both Beijing and Washington had agreed to cancel some existing tariffs simultaneously, but President Trump has said that he has not made such a commitment.
China’s commerce ministry has commented that the removal of existing tariffs is a critical component to any trade deal. In response, Washington has asked for higher quantities of purchases in the industries of financial services, agriculture and others, though no such commitment from China has been secured thus far. The U.S. has also asked China to take additional measures regarding the protection of intellectual property, an issue that has long been a sticking point in the negotiations.
At the moment, the U.S. has imposed tariffs on nearly $500 billion of Chinese goods, while China has imposed tariffs on approximately $110 billion of American imports. According the Wall Street Journal, the U.S. has collected as much as $63 billion in tariffs through June, with numbers rising month over month in the last quarter of 2019. However, analysts claim that it is business owners who are bearing the brunt of these fees, despite Trump’s claims to the contrary, and that a long-term extension of the tariffs could hurt both business owners and consumers badly.
Also complicating matters was a legislation passed in the U.S. senate on Tuesday supporting Hong Kong protesters, a move that could trigger retaliation from China. Still, the bill requires passage by the House of Representatives and a stamp from President Trump before it becomes a law.
Asian markets responded to the political turbulence by trending downward on Wednesday, with all major benchmarks trading lower in the mid-afternoon. South Korea’s Kospi was 1.11 percent lower as of 2:21 p.m. HK/SIN, while Hong Kong’s Hang Seng Index was 0.55 percent lower. Australia’s ASX 200 slumped 1.35 percent and Japan’s Nikkei 225 was down 0.62 percent.
On the currency markets, the dollar was modestly higher against its primary trading partners, with both the pound and the euro slipping against the greenback. The dollar was a touch lower against the yen, trading at 108.51, but the dollar index managed to remain in the green, trading up 0.05 percent to 97.90.