With Chinese stocks down a staggering 6% on Monday during their worst session in three years, Chinese state media scrambled to project an air of calm. Though his comments did little to quiet stormy markets, Chinese foreign ministry spokesman Geng Shuang told reporters Monday that a trade delegation is still "preparing to travel to the U.S. for trade talks" or what was - according to the US, at least - supposed to be the 'final round' of negotiations. However, he declined to say whether Vice Premier Liu He would join the delegation, Reuters reported.
The Global Times, an English language mouthpiece for the Chinese government, affirmed that the delegation's decision to stick with its travel plans following Trump's threat to hike tariffs this week over frustrations with the grinding pace of talks (which, until last week, had, according to both sides, had been inching closer to a deal) should be seen as a "gesture of goodwill").
I got the information that Chinese delegation may still go to the US. This should be seen as a good will from the Chinese side.— Hu Xijin 胡锡进 (@HuXijin_GT) May 6, 2019
However, the South China Morning Post reported that Liu might delay his trip and leave Beijing on Thursday, three days later than previously scheduled, or possibly cancel the trip altogether.
In any case, Geng said during the press conference that China's positions were "clear" and that they hoped to work toward a deal that would "benefit both sides".
"There have been many times that the US side has threatened to increase tariffs," Geng said when asked about Trump’s tweets on Sunday which threatened to impose punitive tariffs on US$200 billion of imports from China tariffs beginning on Friday. "China’s positions are clear and the US side is well aware of them."
"[We have hoped] to make progress in our trade talks and [we] hope the US side can work together with us and move in the same direction so we can achieve a deal that can benefit both sides. Everyone in China and abroad is very concerned about the next round of talks, and we are also learning about the relevant changes. The Chinese delegation is preparing to go to the US for the negotiations."
One analyst told SCMP that the Chinese are familiar with Trump's tactics, and seemed to imply that China wouldn't cancel the talks because that would allow Trump to blame them for the collapse.
"If China cancels the trip, Trump would blame China for the failure of the trade negotiations," he said.
One possible response from China could be to send a smaller delegation to US, he said.
"After the intensive talks, China is familiar with the style of Trump and his administration. Trump’s flip-flop announcement is not a big surprise for China, but China should be prepared for the worse-than-worst scenario," Lu Said.
But in the US, Dow futures were off more than 500 points, the USD/JPY was off 0.4% to its lowest level since late March, as China's onshore yuan hurtled toward new lows of 7 to the dollar and oil tumbled 1.5% as the faltering trade talks revived fears about global growth.
Trump's warning that he planned to move ahead with a planned tariff hike that had been suspended after Trump and President Xi fist agreed to pursue talks during a dinner in Buenos Aires, and then again at the end of February (as well as slap duties on an additional $325 billion of goods), followed a flurry of reports last week that the Chinese were demanding steep concessions from the US, which had caused talks to stall. The head of the US Chamber of Commerce had also warned that China was pushing back against US demands to end subsidies to state-backed firms "in a broad range of sectors."
Reports in Chinese media pushed back on the insistence by the US side that a deal would hopefully be reached by the end of this week, when the 11th round of talks would have concluded. The Chinese side described this as a "trick" and a "pressure campaign" to try and bully Beijing.
"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."
Treasury Secretary Steven Mnuchin said shortly before he and Robert Lighthizer headed to Beijing last week for a 10th round of talks that the US side expected to "either recommend to the president we have a deal or make a recommendation that we don’t."
Trump initially imposed duties of 25% on an initial $50 billion of Chinese goods in July and August last year and then slapped another 10% on an additional $200 billion in products in September.
Meanwhile, as the return of open trade hostilities between the US and China hammers markets around the world, the Europeans have voiced their frustration with Trump's threats.
- HEAD OF GERMAN CHAMBERS OF COMMERCE TELLS AUGSBURGER ALLGEMEINE NEWSPAPER ANNOUNCEMENT OF NEW TARIFFS BY U.S. ON CHINESE GOODS "NOT GOOD AT ALL FOR GERMAN ECONOMY"
With the market's four-month streak of steady gains suddenly shattered, all eyes will be on what Trump tweets next.