US- China Trade Talks Break Down After US Rejects "Frustrated" Beijing's Offer To Cut Deficit

While much of the overnight session was market by the previously discussed buying euphoria that sent futures over 1% higher after Monday's disappointing close following a "conciliatory" speech by China's president Xi who - once again - promised to open China's economy and lower import tariffs, there was a moment of sheer angst when just before 4am ET, Bloomberg almost broke the narrative of Xi trade war "reconciliation" when it reported that trade talks between the US and China broke down last week after the Trump administration demanded that China curtail support for high-technology industries, which in turn spiked the JPY, if only briefly.

As Bloomberg details, the tentative negotiations broke down when Liu He, a vice premier overseeing economics and finance, told officials last Thursday that Beijing had rejected a U.S. request to stop subsidizing industries related to its “Made in China 2025” initiative, a key target of Peter Navarro's ire which he has accused China of using to force companies into transferring technology in areas like robotics, aerospace and artificial intelligence.

Curiously, China's rejection of U.S. demands came after Beijing had already offered to narrow the trade deficit by $50 billion, including by importing more liquefied natural gas, agricultural products, semiconductors and luxury goods. The plans also included opening the financial sector at a faster rate and giving U.S. companies more access to China’s booming e-commerce market, the person added.

In other words, China was willing to make a major concession in the escalating trade war, but the Trump administration rebuffed it when it considered that Beijing would not taper the "2025" initiative, and also coincides with Trump's escalated demand last Thursday that called for an addition $100 billion in tariffs.

* * *

After negotiations collapsed, vice premier Liu reportedly said President Xi Jinping was ready to fight back hard if Trump wanted a trade war.

China was open to talks with the U.S., but wouldn’t initiate them under the current conditions, the person said, citing Liu.

What this dust up suggests, is that contrary to the overnight euphoric "hot take" of Xi's speech, "the trade dispute won’t be resolved quickly, despite Trump’s optimistic tweets and Xi’s conciliatory address to a regional economic forum Tuesday" according to Bloomberg.

In fact, it's worse: "In recent days, Chinese officials have expressed increased frustration with the U.S., with the foreign ministry on Monday calling talks “impossible” under current conditions."

To be sure, Xi did all he could to exude a sentiment of optimism during his Boao speech:

Xi pledged a “new phase of opening up.” He reiterated plans to allow more foreign participation in sectors like automobile manufacturing and banking, and said China would strengthen measures to protect intellectual property rights.

Xi also called on countries to export high-technology goods to China, which has been a point of contention with the U.S. A commentary in the official People’s Daily after the speech said Beijing would never open at the expense of its interests -- a signal that it would continue supporting “Made in China 2025.”

How did Trump react to the Xi speech? While we have yet to get a tweet from the president on the topic, a White House official who watched Xi’s speech told Bloomberg he welcomed remarks on intellectual property while saying that actions speak louder than words.

Trump’s administration was unified in the view that U.S. jobs were endangered by what it called China’s forced technology transfers and state-directed intellectual property theft, the official said.

And just to underscore what happens next, Bloomberg again repeats that Liu's remarks  - who is taking the lead on the government’s response to Trump’s trade moves - "suggest the dispute won’t be resolved easily." The meeting was held before Trump instructed officials to consider tariffs on an additional $100 billion in Chinese imports, bringing the value of the nation’s products set for higher duties to about $150 billion. The U.S.’s bilateral trade deficit was $375 billion last year.

Shortly thereafter, China vowed a harsh response to Trump’s latest threat, helping to spur a selloff that prompted the S&P 500 Index to fall 2.2 percent last Friday. Geng Shuang, a foreign ministry spokesman, said Monday that it was “even more impossible” for trade talks to take place under the current environment.

“This trade conflict was initiated by the U.S. alone and it is entirely the one to blame,” he said. “The U.S. is wielding the big stick of trade sanctions while keeping saying they are willing to talk. I am not sure who the U.S. is putting on such acts for.”

We wonder how long it will take algos to realize that what really matters from the overnight newsflow is this very explicit deterioration in trade talk which guarantees that the trade conflict isn't going away any time soon, rather than Xi's speech which, as UBS' Paul Donovan wrote earlier, "recycled his January Davos remarks."


CashMcCall Ghost of PartysOver Tue, 04/10/2018 - 10:48 Permalink

That may actually be the dumbest post I have ever read on Zerohedge. Are you so stupid that you have no idea what Trade deficit means? It is not a ledger transaction you dope. It is a conversion rate nothing more. 

If you a Cverkoff lives in New Cverkoff and buy a car from Michigan does that create a Trade Deficit between New Cverkoff and Michigan? YES. Is there a ledger shortfall? No. You pay depreciating dollars and get a depreciating asset a car. It was a mutually beneficial trade. Your standard of living rises. Michigan's standard does not rise unless they spend the money. Irrelevant where anything is made or grown. You trumpjunkies are dumb as dirt. Why don't you invest in some education other than that fraud Trump University? Now there you have a ledger loss. 

In reply to by Ghost of PartysOver

two hoots Pandelis Tue, 04/10/2018 - 07:46 Permalink

At least we didn't wake up to the world on fire in the ME, yet?


 It will take a while to determine the financial charges against Cohen even after they raid his offices.  Given Cohen is one guy, a US guy, is it even reasonable to think a few trade negotiators could possibly disentangle the internal economic flow of monies in a People’s Republic, communist led nation as large as, complicated as, corrupt as, sly as, wise as China?   Likely short term things will sound good, seem fairer but in the long run little will change, this is an trade war, a business war.  Will just become more covert.   Watch trade deficits in a year or two to determine how things really go.




In reply to by Pandelis

CashMcCall Omega_Man Tue, 04/10/2018 - 11:06 Permalink

Actually, you are on the money. The key to all this nightmare US Trade war is the US Dollar Reserve. It has been used as a weapon since it began in 1944 following the Anglo American loan. The US has since used it as a weapon, shafting the world and exporting their inflation. They enforce it with their 800 military bases and patrolling the seas enforcing sanctions. Don't tow the line and they sanction you. 

On march 28, China placed the first Yuan Gold back oil futures contracts in Hong Kong and they were sold out immediately. The US has backed Russia and China in a corner. They are trading oil in Yuan. This is the end of the monopoly. 

Trump then started the trade war, China has shown restraint, US Ag markets are demolished and won't be coming back. China is outsourcing ag so Trump's political days are numbered. He is as corrupt, dishonest, and manic. That is everything markets don't like. 

BTW... laughably Mnuchin said the US had lots of other places to sell their debt so if China sold off Bonds it wouldn't have any effect on the US. Talk about nuts... that says it all. 

What do we find out today... Jews Hit Syria in a sneak attack authorized by the US of course. Middle Eastern Thug to replace our British Thugs. More neocon warmongering. The US is becoming a despicable menace. 

In reply to by Omega_Man

LawsofPhysics Tue, 04/10/2018 - 07:36 Permalink

The Chinese invented fiat currency for fuck's sake and The People's Bank of China has been printing far faster than the Fed.  The big difference is that the Chinese central bank looks after the interests of the Chinese while the Fed doesn't give a rats ass about the peasants in the western world.  All that aside. Enough bullshit talk, sell ALL your U.S. assets and U.S. paper China or SHUT THE FUCK UP!

In the meantime...

"Full Faith and Credit"

same as it ever was!

truthalwayswinsout Tue, 04/10/2018 - 07:39 Permalink

$50 billion ohhh wow just think they can still steal everything but instead of $400 billion it is only $350 billion.

We should have broken off talks immediately and instituted a total boycott or 100% tariffs on everything coming from China for the insult.

Then we should have sent envoys to Korea, Taiwan, Japan, Philippines, Vietnam, and India and announced a new initiative to develop free trade with those countries.

You cannot lose a trade war with the trade deficit we have with China. They already sanctioned 100% of our exports to them and most of that was food. There is nothing they can do to us. And if you think the treasuries are something they can dump if they dump those their entire economy falls apart because they were using them as fractional banking to leverage what I initially thought was $10 trillion but is in fact $50 Trillion in loans.



CashMcCall truthalwayswinsout Tue, 04/10/2018 - 11:18 Permalink

What is this your GED showing? Trade Deficit is not a ledger transaction it is a conversion rate that's all. 

If you buy a smartphone your standard of living rises. They get money. Unless they spend it their standard of living does not rise. But the transaction has no losing party. It is mutual traders there is no dollar loss you dope. 

Smartphone, big tvs etc need software and content or they are useless commodities. So the more smartphone sold to Americans, the more money is generated to US firms that make software, sell data plans, internet service, entertainment content. Those are the value trade units NOT THE FREAKING low margin commodity! 

You're dumb as Trump... You are Trumpdumb. That's very very bad.

In reply to by truthalwayswinsout

Fiscal Smegma Tue, 04/10/2018 - 07:40 Permalink

“This trade conflict was initiated by the U.S. alone and it is entirely the one to blame,” he said. 

Bull Shit, The Chinks have been steeling us blind for decades WTF is this liar talking about.

The_Dude Tue, 04/10/2018 - 07:41 Permalink

China:  Please send us your technology... we promise we have your best interests in mind. 

Dumb American Corps:  Uhh..OK... if you put it that way. 

HillaryOdor The_Dude Tue, 04/10/2018 - 08:09 Permalink

Intellectual property is an abomination that holds back innovation over the entire world.  The one and only thing I applaud China for is ignoring this bullshit which is a US law, not a Chinese one, and certainly not a natural law except to misguided objectivists, and most of all is completely unenforceable. Pull your head out of your ass and you would see such a law is not a just law in the first place.  You brainwashed morons wouldn't know what's in your best interests if it were slapping you in the face.

In reply to by The_Dude

gmak Tue, 04/10/2018 - 07:44 Permalink

And  yet, markets which ran up on the so-called "globalist" speech, stayed where they were when it became apparent that this was more jaw-boning.  But then, price has to go up for distribution to take place. Step right up! Who wants the next bag of sh%t?

Omega_Man Tue, 04/10/2018 - 07:44 Permalink

merican jews print all the subsidies they want or can and give to jewish business, yet ask china to stop spending... what a fuking joke


Ban jewmerica today! 

Omega_Man Tue, 04/10/2018 - 07:49 Permalink

merica is such a sick bullshit nation... why can't merican goy run merica? Why do you need zio masters? Have you no shame? Are there no real men in merica?

Dilluminati Tue, 04/10/2018 - 07:49 Permalink

I don't think people realize that the trade is essentially:

For each twinkie you get I send you 5! 

For each beer you buy, I buy 5!

And then to exasperate things moreso, the actual companies are owned directly by the PLA (their military) which insists on a 51% ownership (which is to say, you can't buy the Peoples Liberation Army)…

This has been going on way too damn long!



CashMcCall Dilluminati Tue, 04/10/2018 - 11:35 Permalink

Oh... Look at the USA... The Gubberment is a 22% partner in every corporation in Ameria with no investment. They call it Corporate Tax. 

Look at Defense companies...

you pay for the feasibility, the prototypes, the tooling, the factory, the cost overrides, you taxpayers buy the products, fund the production, pay for those cost overrides. Then when the company converts the military product to a commercial purpose and sells it on the open market, you don't even get a commission. GET NOTH'IN! 

In reply to by Dilluminati

Batman11 Tue, 04/10/2018 - 07:50 Permalink

Globalisation handed everything to China on a plate.

China has played a blinder and taken naive Western globalists for the ride of their lives.

The West played by the rules of economics and China looked after its national interests.

The Western economies got hollowed out and China turned into a super power.

Geopolitics 1, economics 0.

The broader political economy might have helped, which looks at the bigger picture and the nation as a whole.

Narrow economics just concentrates on maximising profit, which is best done in China with its low labour costs.

We let the wealthy keep their money so they could invest in Asia for the best returns.

The Government would have spent that money here if they had taken it in taxes.

Political economy 1, narrow economics 0

Batman11 Batman11 Tue, 04/10/2018 - 07:50 Permalink

What is the West’s problem?

Disposable income = wages – (taxes + the cost of living)

The minimum wages is set when disposable income equals zero.

The minimum wage = taxes + the cost of living

Maximising profit requires minimising wages.

The West’s cost of living is far too high, look at housing costs.

In reply to by Batman11