Beijing Warns Trade Talks Will Collapse If White House Doesn't Compromise

More cracks are forming in the White House's carefully-constructed narrative that trade talks could be headed for a resolution next Friday following the 11th round of talks between US and Chinese trade negotiations in Washington. After Beijing floated a report on Thursday suggesting that talks had been an impasse, sending stocks hurtling toward session lows early Thursday afternoon, they have followed up on Friday with a statement casting doubt on Washington's assertion that a deal is imminent.

Mnuchin

According to the South China Morning Post, the Communist Party has published what appears to be a warning to Washington and the investing public. The Communist Party warned in a post on Taoran Notes, a venue for publishing trade-talk updates for the Chinese public, that reports about a deal being reached next Friday were part of a pressure campaign to get Beijing to acquiesce to a deal, adding that this "smoke and mirrors" ploy wouldn't work.

"Taoran Notes, a social media account used by Beijing to release trade talk information and to manage domestic expectations, said the hints from the US side that next week’s 11th round of talks are a deadline is merely a trick “to increase tensions and generate pressure on the other side."

"It’s the same tactic as the US threatening to raise tariffs, it is merely smoke and mirrors to exert extreme pressure [on China]," the post said. "You don’t have to take it seriously."

Of even greater concern for stock market bulls: Beijing warned that "an unhappy departure" is still possible if the US fails to compromise.

It warned that there is still a possibility that the two sides will end up in "an unhappy departure" if one side wants the other to make compromises and neglects "fairness in negotiation."

Exact details of the talks are shrouded in secrecy, although Beijing and Washington have hailed "progress" after every round of talks over the last five months, with Mnuchin calling this week’s talks in Beijing "productive."

Which is surprising because over the past week, media reports have suggested that the US has done nothing but compromise. Not only have Mnuchin, Lighthizer & Co. reportedly backed down on US demands for a stable enforcement mechanism and - even more embarrassingly - demands that China promise to end its cyberespionage campaign, and the US Chamber of Commerce said Thursday that a final deal could fall short on addressing state industrial subsidies - another one of the Trump Administration's key demands.

During a speech at the BRI Forum last week, President Xi spoke about promises to increase agricultural purchases, increase market access for foreign companies and prohibit forced technology transfers. Though Xi didn't explicitly mention talks with the US, it's looking increasingly likely that these concessions represent a 'final offer' from Beijing.

Whether the White House decides to take it, or leave it, next week could decide whether a deal is reached, or China walks away.