White House Economic Adviser Larry Kudlow

It is doubtful whether a phase one trade deal will be concluded before the end of the year, and in the absence of a deal, U.S. President Donald Trump could go ahead with imposing more tariffs on USD156 billion worth of Chinese imports on December 15. White House Economic Adviser Larry Kudlow said that the deadline had not changed, while U.S. negotiators push Beijing to agree to an enforcement mechanism as part of the trade deal. “There’s no arbitrary deadline here, but the fact remains that December 15 is a very important date with respect to a no-go or a go on tariffs,” Kudlow said in an interview with CNBC. On the other hand, President Trump said that a trade deal could be delayed until after the U.S. presidential election in November next year. His comments sent stocks down in Asia as investors had been anticipating a deal. China announced soon before Kudlow spoke that it would exempt some U.S. soybeans and pork from tariffs. Kudlow reiterated that progress was made on the road to reaching a deal. “The reality is constructive talks, almost daily talks, we are, in fact, close,” Kudlow said.

The Chinese government wants a proportional lifting of tariffs as part of the deal. At a news conference in Beijing, Ministry of Commerce Spokesman Gao Feng again said that if the two sides agreed to an interim trade deal, “tariffs should be reduced accordingly”. Tensions between the U.S. and China have been rising in the past week caused by the passage of U.S. legislation that has angered Beijing. The U.S. House of Representatives voted to approve the Uyghur Intervention and Global Humanitarian Unified Response Act of 2019, which commands the U.S. administration to identify and sanction officials deemed responsible for violations of human rights in Xinjiang. Earlier, the U.S.Congress also voted into law the Hong Kong Human Rights and Democracy Act. As a result, both sides threatened to impose sanctions on selected individuals. In a first sign of China’s hardening stance, Tara Joseph, President of the American Chamber of Commerce (AmCham), and Chairman Robert Grieves were denied entry to Macao as they were attempting to go to the annual AmCham Macao Ball. They were detained for two hours and sent back to Hong Kong without any explanation given.

Meanwhile, President Trump called on the World Bank to halt all China lending, saying that China has plenty of money. He made the call a day after the institution adopted a lending plan to Beijing despite Washington’s objections. The World Bank announced that it would provide China with USD1 billion to USD1.5 billion in low-interest loans annually until 2025. The plan called for lending to “gradually decline” from the previous five-year average of USD 1.8 billion. Trump tweeted: “Why is the World Bank loaning money to China? Can this be possible? China has plenty of money, and if they don’t, they create it. STOP!”. The World Bank loaned China USD1.3 billion in the 2019 fiscal year, which ended on 30 June, a decrease from about USD2.4 billion in fiscal 2017.

The U.S. trade deficit in October declined to its lowest level since May 2018 as tariffs limited imports from China. “I think it’s just a blip,” Gary Hufbauer, Senior Fellow at the Washington-based Peterson Institute for International Economics, told China Daily. “The tariffs will, after six months, divert U.S. imports to other sources, but won’t permanently reduce the global trade deficit.” In the third quarter, the U.S. trade deficit with China fell by USD2.6 billion to USD77.3 billion. Imports of consumer goods decreased by USD2.4 billion in October, including a USD400 million drop in cellphones, and a USD300 million drop in both the clothing and toy sectors.

China’s exports in November fell 1.1% from a year earlier, marking a fourth successive monthly decline. Imports grew 0.3% in November – the first monthly increase since April and only the second this year. China’s foreign trade volume over the first 11 months of 2019 expanded 2.4% year-on-year to CNY28.5 trillion. Exports climbed 4.5% to CNY15.55 trillion, and imports totaled CNY12.95 trillion. The trade surplus widened by 34.9% to CNY2.6 trillion during the period. Chinese exports to the U.S. fell 12.5% year-on-year in U.S. dollar terms in the first 11 months, while imports dropped 23.3%. Exports to the EU rose 4.5% in the year through November, while imports rose 0.3%. China’s trade balance for November stood at USD38.73 billion.