Partial agreements expected in China-US trade talks despite major differences

According to a piece carried by the Global Times, China's national English language newspaper, under the People's Daily, China and the US are expected to reach a partial and temporary trade agreement in the last quarter of 2019, but major differences, such as eliminating the tariffs, state subsidies, and disputes on intellectual property protection will remain.

Additional Quotes:

“As the victim and passive receiver of the China-US trade war, China hopes to reach a trade agreement with the US as soon as possible.

China has three bottom lines. First, the US-imposed tariffs on Chinese products must be abolished. Second, China's purchase of US products must correspond to reality. Third, the agreement must be fair on both sides.

This means the agreement should not compromise China's national dignity, specifically on issues affecting China's domestic economic mechanisms and policies.

The US has eight demands, including reducing a $100 billion trade surplus within one year and another 100 billion the following year, and halt subsidies to the advanced manufacturing industry included in "Made in China 2025," according to media reports.

It is not difficult to see that there are major conflicts between China and the US, which means it is impossible to reach a comprehensive and permanent trade agreement in the near future. However, we can expect a partial and temporary trade agreement.”

The risk sentiment could get a fresh boost on a potential partial or temporary US-China trade deal, which could drive USD/JPY back above the 109 handle. However, the next direction on the major will be determined by Wednesday’s FOMC decision.

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