Amid increasing odds for the key US-China “phase one” deal, Politico recently came out with a news saying that China is demanding that the United States (US) President Donald Trump not only eliminate a round of tariffs scheduled to go into effect in mid-December but also wants him to lift another substantial round of penalties imposed in September. The news comes in as Chinese President Xi Jinping considers a visit to the US for the key deal while relying on three people familiar with internal discussions.
Key quotes
“Beijing is engaged in a "full-court press" for the removal of the tariffs in exchange for agreeing to buy up to $50 billion worth of U.S. farm goods within two years and implement commitments to open its financial services sector and increase intellectual property protections, one of the people said.”
“Beijing is also pushing the U.S. to remove a 15 percent tariff that was imposed on roughly $112 billion worth of Chinese goods on Sept. 1 but no decision has been made, the people said.”
“China is also very eager to have a 25 percent tariff removed, or at least cut in half, on an additional $250 billion worth of Chinese goods, although that is not anticipated to be part of a deal right now, the people said.”
“U.S. officials are currently struggling over how to make sure China lives up to its side of the deal. The main enforcement mechanism being considered is that all the tariffs could be re-imposed, one of the people said.”
FX implication
As the Asian markets are still in their nascent stage due to early Tuesday morning hours, reaction to the news is quite low. However, this might affect the recent risk-on based upon the increasing chances of a phase one deal, which in turn could weigh on the AUD/USD pair that takes the rounds to 0.6883 by the press time.
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