The trade negotiations between the United States and China continue to dominate the market news today. According to officials familiar with the talks, the two countries are quite close to reaching the so-called phase-one agreement, as long as they manage to resolve their most immediate problems.
Recently, China stated that for an agreement to be possible, the United States must agree to roll back some of its older tariffs, with China doing the same in return. According to the Chinese government, the tariffs are what is making the issue worse, and they need to be removed if the two countries are to more forward in their trade relationship.
However, the United States team has said that removing the tariffs now, before China has agreed to make any substantial reform, will be pointless. The US still has a major issue with the way China treats intellectual property, as many US companies choose to manufacture their goods in China, yet find that local Chinese companies are able to produce similar goods using American IP, interfering in the respective sectors where those US companies are active.
Moreover, the trade negotiations have become strained due to the United States involving politics in the talks. The US raised the issue of China’s treatment of Muslims, as well as China’s handling of the Hong Kong protests, both of which are not directly connected to trade. However, it appears that the US is trying to make a trade deal conditional upon the resolution of these other issues, which in turn has upset China.
On their end, the Chinese have threatened to release a list of US companies that would no longer be welcome to do business in China. That is arguably the strongest card in China’s hand, and it is unlikely that we will see it in play just yet.
Meanwhile, today OPEC+ member states (which include non-official member Russia) is meeting in Vienna to decide whether to renew and adjust their agreement to cut back oil production. Recent forecasts have pointed out that 2020 will likely remain a bad year for oil due to low global demand. Thus, oil production cuts are most probably going to be necessary to prevent an oversupply crisis on the market.
