China Trade & Economic Update
The WSJ reports that American and Chinese negotiators have signaled that they may be drawing close to a phase one agreement as part of a later, broader accord that would resolve the trade dispute. However, President Donald Trump has said that he wouldn’t mind if it takes until after the 2020 U.S. election, and that a threatened Dec. 15 tariff increase will proceed if the talks fail to yield a deal he likes. Beijing officials reportedly say China’s trade negotiations with the U.S. remain on track. China is in the process of waiving retaliatory tariffs on imports of U.S. pork and soy by domestic companies, a procedural step that may also signal a broader trade agreement with the U.S. is drawing closer.
Until a phase one deal is finalized, however, US importers should continue to prepare for the proposed additional U.S. duties on Chinese imports that would take effect Dec. 15.
The WSJ reports that China's exports dropped 1.1% in dollar terms in November from a year earlier, while imports rose 0.3%. "If a phase one trade deal is struck and there is no further escalation of U.S.-China trade tensions, the drag on China's exports from higher U.S. tariffs will likely ease through 2020," said Sylvia Sheng, global multi-asset strategist at JPMorgan.
Hong Kong Trade Practices
President Trump signed the Hong Kong Human Rights and Democracy Act (S. 1838) into law on November 27. The law requires the State Department to report to Congress each year as to whether Hong Kong remains sufficiently autonomous from mainland China to justify the continuation of the special trade treatment it receives from the U.S. – Hong Kong Policy Act of 1992.
Hundreds of thousands of protesters filled the streets of Hong Kong on Sunday, ahead of the six-month anniversary marking anti-government unrest. The Hang Seng Index is down 4% since the protests ramped up in June.