China promises prompt action on U.S. trade pact

White House chief economic adviser Larry Kudlow

White House chief economic adviser Larry Kudlow

China expressed confidence on Wednesday that it can reach a trade deal with the United States, a sentiment echoed by U.S. President Donald Trump a day after he warned of more tariffs if the two sides could not resolve their differences.

By Tuesday, the optimism had completely faded as Trump once again called out China for its trade practices.

The market is closed Wednesday as the United States celebrates a National Day of Mourning for the late President George H.W. Bush, whose funeral will held at the Washington National Cathedral. The statement did not say whether Trump raised tariffs with executives from BMW, Daimler and Volkswagen. The plunge came hours before the Chinese Commerce Ministry said that it was confident it can reach a trade deal with the U.S as the countries continue to dispute tariffs placed on one another's goods.

In addition, Treasury Secretary Steven Mnuchin said on Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of USA products.

A US government official briefed on the matter told Reuters on Monday that no final report on the investigation is expected for at least a couple of weeks. It wasn't clear whether the preparations meant China would cut the retaliatory tariffs it imposed on those products, or when the purchases would happen.

Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40% tariffs on USA autos.

-China trade war. President Trump and President Xi Jinping have reportedly now agreed to reach a temporary truce in the matter.

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Sources told Reuters that Chinese oil trader Unipec plans to resume buying USA crude by March after the Xi-Trump deal reduced the risk of tariffs on those imports.

But Mnuchin said, "I think there's no question the president's tariff strategy has worked. And it'll have an incredibly positive impact on farming, meaning agriculture, industrial products, computers - every type of product". Failure would raise the spectre of fresh USA tariff action and potential Chinese retaliation as early as March. The slew of Trump tweets prompted markets to fall as investors lost faith in a detente between the two nations.

"We expect the relationship between the world's two largest economies to remain contentious", Moody's Investors Service said in a report.

Daimler chairman Dieter Zetsche told reporters that additional US investments are contingent on conditions remaining the same.

"The actual amount of concrete progress made at this meeting appears to have been quite limited", Alec Phillips and other economists at Goldman Sachs wrote in a research note.

Those 10 percent tariffs were scheduled to ratchet up to 25 percent on January 1 if the US and China failed to reach an agreement to at least postpone that move.

The statement did not mention Trump or Xi, however the state news agency Xinhua later said the ministry statement was hailing their meeting. The downside for China is that it also needs US sourced LNG as its insatiable gas demand expands amid Beijing's mandate that gas make up at least 10 percent of its power generation energy mix by 2020, with further earmarks set for 2030.

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