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Put Condor Update

     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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