by Matthew Rusling
WASHINGTON, June 28 (Xinhua) — All eyes were on China and the United States Friday on the eve of the weekend’s meeting between Chinese President Xi Jinping and his U.S. counterpart Donald Trump. The two sides will meet Saturday to resolve trade tensions that have bedeviled markets and the global economy for months.
U.S.-initiated trade frictions with China have been key market drivers in recent months. May saw markets plummet on news of Chinese retaliation against U.S. tariffs, with June seeing a major surge on news that the two sides will meet during the Group of 20 (G20) summit in the Japanese city of Osaka.
“Markets are basically treading water today ahead of tomorrow’s big meeting,” Desmond Lachman, a resident fellow at the American Enterprise Institute, told Xinhua.
“They are basically assuming that there will be a truce but no real deal,” he said.
“It will be on Monday that markets will react in a big way, negatively if there is a breakdown in relations or else positively if there is more than just a truce,” Lachman said.
Indeed, as Washington has put out seemingly contradictory statements this week, its intentions remain unclear.
On Thursday, White House National Economic Council Director Larry Kudlow told Fox News that the U.S. administration may move ahead with additional tariffs.
That followed Wednesday’s comments from Treasury Secretary Steven Mnuchin, as he told CNBC that the U.S. administration is “about 90 percent of the way there, and I think there’s a path to complete this.”
“The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the U.S. economy to get balanced trade and to continue to build on this relationship,” Mnuchin said.
“There are competing factions that want different things and it often is a surprise where the policy ends up,” Brookings Institution Senior Fellow Darrell West told Xinhua.
Earlier this month, Xi held a telephone conversation with Trump at the latter’s request.
Trump said he looks forward to meeting Xi again during the G20 summit and conducting in-depth discussions on bilateral ties and issues of common concern.
The Chinese president said he stands ready to meet Trump in Osaka to exchange views on fundamental issues concerning the development of China-U.S. relations.
On May 10, the United States increased additional tariffs on 200 billion U.S. dollars’ worth of Chinese goods from 10 percent to 25 percent, and has threatened to raise tariffs on some 300 billion dollars’ worth of Chinese imports yet to be hit.
The market floundered in May — the worst month of May for traders in years — and was zapped back to life earlier this month when Federal Reserve Chairman Jerome Powell signaled that the Fed would lower interest rates to offset any damage done by trade wars.