MNI EXCLUSIVE: Trade Talks May Drag Into 2020: China Advisors

     BEIJING (MNI) - Trade talks between the U.S. and China risk being drawn out

until as long as next year if President Donald Trump goes ahead with his threat

to slap higher tariffs on Chinese goods, prompting likely retaliation from

Beijing, trade experts advising the Chinese government told MNI.

     China could hit back with its own punitive tariffs and by dropping previous

promises to the U.S. such as increasing imports of American goods and lowering

levies on U.S. cars if Washington raises tariffs on Friday as threatened, the

advisors said.

     Talks would probably stop for some time, before eventually resuming, said

Wang Haifeng, director of International Trade and Investment at the Chinese

Academy of Macroeconomic Research, run by the National Development and Reform

Commission.

     "The two countries won't stop long-term cooperation or communication. We

would see tariffs, deadlock, then a resumption of negotiations - a back and

forth," Wang said.

     The U.S. is looking for fresh concessions, the advisors said, after Trump

accused China of trying to "renegotiate" matters that had already been agreed.

     China's Ministry of Foreign Affairs on Tuesday said Vice Premier Liu He

will still lead a delegation to Washington for an 11th round of talks, but the

chances the visit will wrap up a high-stakes trade deal are falling.

     "Trump is asking too much," Wang said. "The majority of Chinese still

support reform and opening up, so the Chinese team still has some room for

negotiation. But no matter who leads the delegation, they need to consider how

much domestic groups can bear and opinions of the public."

     There is a 35% chance that trade talks will be extended to the second half

of this year, Wang predicted, with a 15% probability of failure leading to

negotiations extending well into next year. There remains a 50% chance of a deal

in the first half of this year.

     The better performance of the U.S. economy in Q1 may have given Trump

sufficient confidence to scale up pressure on China, the advisors said. A

stabilising Chinese economy may also bolster Beijing, observers and analysts

said. China's central bank lowered the reserve requirement ratio for smaller

banks on Monday, a move which might help the economy better withstand long-term

frictions with the U.S.

     "There are some voices domestically that question whether we have made too

many concessions," said Tu Xinquan, a foreign trade expert at the Advisory

Committee for Economic and Trade Policy of the Ministry of Commerce. "There is

some pressure from public opinion."

     But Mei Xinyu, researcher at the Ministry-of-Commerce-managed Chinese

Academy of International Trade and Economic Cooperation, told MNI he still

expected a deal to be reached.

     "Trump is playing some tricks at the edge of a cliff," Mei said. "The trade

deal should eventually be reached, but now it could be pushed back, and the

exact timing will depend on when Trump has finished his petty show of temper."

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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