U.S., Chinese officials conclude contentious economic talks, steel stocks soar

Flags of U.S. and China are placed for a meeting between Secretary of Agriculture Sonny Perdue and China's Minister of Agriculture Han Changfu at the Ministry of Agriculture in Beijing, China June 30, 2017. REUTERS/Jason Lee

Senior U.S. and Chinese officials concluded contentious economic talks on Wednesday but the outcome was clouded by the cancellation of closing news conferences and U.S. demands for a “more fair” trading relationship with Beijing.

U.S. Treasury and Commerce Department officials declined immediate comment on the annual summer dialogue between Washington and Beijing, while the Chinese delegation’s leader, Vice Premier Wang Yang, left the Treasury building without speaking to reporters.

The two sides did not issue a joint statement or action plan following the meeting, a significant departure from past years and another sign of likely disagreements.

Investors interpreted the negative signals from the talks and lack of new trade announcements as making it more likely that the Trump administration would forge ahead with broad steel tariffs or quotas based on a national security review, sending steelmakers’ shares soaring.

Shares of United States Steel Corp (X.N) closed up 4.8 percent, while AK Steel (AKS.N) rose 3.6 percent and Nucor (NUE.N) rose 2.2 percent.

After the market closed, a reporter at the White House asked President Donald Trump whether he would impose steel tariffs, eliciting the response: “Could happen.”

The potential steel tariffs, which could be announced in the coming weeks, were expected to be a difficult topic in the U.S.-China talks. Commerce Secretary Wilbur Ross has blamed massive Chinese excess capacity for a global steel glut that is hurting U.S. producers.

“Investors are essentially handicapping a probability that Trump will announce a broad-based anti-dumping measure on steel imports,” said Longbow Research analyst Christopher Olin.

In opening remarks to the U.S.-China Comprehensive Economic Dialogue, Ross sharply criticized China’s $347 billion trade surplus with the United States, saying it was not the product of market forces and the bilateral trading relationship needed to change.

“We must create more balance in our trade by increasing exports of made-in-America goods to China,” Ross said at the Treasury Department. “There are significant opportunities to do this if we can work together to remove the significant barriers that continue to exist.”

Neither the Treasury nor the Chinese embassy offered explanations for why their news conferences scheduled for late afternoon were canceled.

It was unclear whether the talks covered U.S. demands that China put more pressure on North Korea to curb its nuclear and missile development efforts. Trump has said that China would get a better deal on U.S. trade terms if it cooperates on North Korea.

The Trump administration could impose new sanctions on small Chinese banks and other firms doing business with Pyongyang within weeks, administration sources said last week.

The meeting came at the end of a 100-day effort to craft an economic plan aimed at reducing the U.S. goods trade deficit with China. So far, China has agreed to resume purchasing U.S. beef after a 14-year hiatus and committed to buy U.S. liquefied natural gas and open some parts of its financial services markets, such as card payment services.

Ceo Cooperation

Even if the U.S. and Chinese governments fail to agree on more substantive trade terms, corporate chief executives from the two countries pledged to deepen their cooperation and joint investment efforts.

Led by Blackstone Group (BX.N) CEO Stephen Schwarzman and Alibaba Group (BABA.N) CEO Jack Ma, a group of 20 executives said they were committing to increase bilateral trade, including the export of U.S. agricultural goods, liquefied natural gas and consumer products to China.

“A stable, growing economic relationship between the United States and China is mutually beneficial to the people of our two countries and for the world,” Ma and Schwarzman said in a joint statement.

U.S. Treasury Secretary Steven Mnuchin repeated calls by his predecessors for Beijing to rebalance its economy toward household consumption and away from exports and investment, a move he said would foster healthier, more sustainable growth.

“Foreign participation in the Chinese financial sector will help improve the allocation of resources to the most productive sectors of the Chinese economy and contribute to a stronger global financial system,” Mnuchin said.

Wang said at the opening that two sides should maintain a healthy dialogue and warned against starting down the path of confrontation over trade.

“Dialogue cannot immediately address all differences, but confrontation will immediately damage the interests of both,” Wang said.

By David Lawder and Lesley Wroughton

Additional reporting by Noel Randewich in San Francisco; Editing by Jeffrey Benkoe and James Dalgleish


Please enter your comment!
Please enter your name here