Trump says Phase 2 China trade deal unlikely at this point

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WASHINGTON (July 11): US President Donald Trump said a phase two trade deal with China isn’t under consideration, saying the relationship between Washington and Beijing has deteriorated too much.

“I don’t think about that,” Trump said yesterday when asked about the possibility of a second round of trade agreements with China. “The relationship with China has been severely damaged.”

Trump’s comments — made to reporters aboard Air Force One on his way to Florida for a fundraiser and a visit to a military base — reflect the steady breakdown of ties between the two nations over the coronavirus pandemic, trade and the competition for military supremacy in the South China Sea.

When the two nations agreed to the first phase trade deal in January, Trump said that talks on a second phase could start right away but might not finish until after the Nov 3 general election. Since then, the two countries have been wrangling over the implementation of the initial agreement, and Phase 2 was contingent on the first rounds going well.

US stocks held onto most of their advance after the news, a signal that investors may have discounted the prospects for further progress in US-China trade any time soon.

In the first phase of the trade deal signed on Jan 15 in Washington, China committed to revamp its intellectual-property protections and to buy some US$200 billion (RM853.2 billion) in additional US exports over two years, in return for the US offering some relief on tariffs. So far, China has stuck to its plan to accelerate imports of American farm goods after talks in Hawaii.

Key issues in the trade relationship remain, including dealing with the web of industrial subsidies that have helped give Chinese companies a leg up in growing into fierce global competitors in recent decades.

The US has ramped up pressure on China across many fronts in recent months, accusing it of covering up the origins of the Covid-19 pandemic and reneging on promises to guarantee political autonomy to the former British colony of Hong Kong. The election campaigns for Trump and Democratic presidential nominee Joe Biden have sought to taint each other as weak in confronting Beijing’s leaders.

The administration plans to make an announcement next week related to China’s decision to conduct military exercises in the contested waters around the Paracel Islands, a move the US has deemed “unlawful”, according to people familiar with the matter.

On Thursday, the US sanctioned a top member of China’s ruling Communist Party and three other officials over human rights abuses against Muslim Uighurs in the western region of Xinjiang. Trump is also poised to sign legislation punishing Beijing for quelling dissent in Hong Kong as it took steps to limit the island’s autonomy.

Some top advisers to Trump want the US to undermine the Hong Kong dollar’s peg to the US dollar as the administration considers options to punish China for recent moves.