The trade war between the United States and China is starting to have an impact on the global economy. Photo: iStock
The United States and China are locked in an intricate chess game. Image: iStock

Washngton and Beijing  are very close to reaching a trade agreement, US Treasury Secretary Steven Mnuchin said on Wednesday, adding that he is optimistic that progress can be made during weekend talks between China’s Xi Jinping and US President Donald Trump.

“We were about 90% of the way there [with an agreement] and I think there’s a path to complete this,” he told America’s CNBC TV network in Manama, Bahrain.

Mnuchin said he’s confident Trump and the Chinese president can make some headway in the stalled trade talks at the G20 meeting.

“The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the US economy to get balanced trade and to continue to build on this relationship,” he said.

He did not offer any details on what negotiating the final 10% of an agreement might involve, or elaborate on the obstacles negotiators face.

G20 in Osaka

Trump is meeting Xi on Saturday at the G20 summit in Osaka, Japan. The outcome could be pivotal for the world economy and financial markets, which have been rattled by 18 months of trade tensions between the economic giants and an escalation of tariffs on each other’s imports.

Officials have so far failed to negotiate a breakthrough, but it is widely hoped that a meeting between the two leaders could help move the talks along. A Bank of America Merrill Lynch survey of investors found that about two-thirds expect no deal this weekend, but they believed there would not be any new tariffs either.

“I’m hopeful that we can move forward with a plan,” Mnuchin told CNBC. “President Trump and President Xi have a very close working relationship. We had a productive meeting at the last G20.”

Read: Why G20 might emerge stronger in Osaka

At their meeting in December at the G20 in Buenos Aires, Trump and Xi reached a truce in the trade war, but talks in May broke down and the countries imposed additional tariffs.

Mnuchin said he was hopeful an agreement could be struck by the end of the year but said “there needs to be the right efforts in place.” Dow futures rose after Mnuchin’s comments and signaled a higher open for Wall Street Wednesday.

Talks between the US and China broke down in May because China reportedly did not want to commit to changes in its laws to help address American concerns about intellectual property theft, mandatory technology transfers and currency manipulation.

Commerce Secretary Wilbur Ross recently played down hopes for a Trump-Xi breakthrough this weekend, saying in mid-June that “the most that will come out of the G20 might be an agreement to actively resume talks.”

Global forecast

The trade war has impacted the Chinese and American economies, despite both leaders claiming otherwise. In April, the International Monetary Fund lowered its global growth forecast for 2019 to 3.3%, down from an earlier forecast of 3.5%, citing ongoing global trade tensions as the reason for the downgrade.

Meanwhile, Trump told Fox Business Network on Wednesday morning that additional tariffs will be considered if an agreement cannot be reached between the two economic giants.

“This never happened to China. Now what is happening is people are moving out of China. Companies are moving out of China, by the way, some are coming back to the United States because they don’t want to pay the tariff, etc., etc.,” Trump said.

“But it’s been an incredible thing. Am I happy now? Absolutely. Now I would do additional tariffs by very substantial additional tariffs if that doesn’t work if we don’t make a deal,” he added.

“China’s economy is going down the tubes – they want to make a deal.”

– with reporting by CNBC, Reuters, The Hill, and AFP

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