MNI POLICY:Trump Says To Meet Xi At G20 After "Very Good" Call

By Greg Quinn

     OTTAWA (MNI) - U.S. President Donald Trump said he had a "very good" phone

call with his Chinese counterpart and that the two leaders will meet next week,

an encounter that could prevent a fresh round of tariffs threatening the global

economy.

     "Had a very good telephone conversation with President Xi of China. We will

be having an extended meeting next week at the G-20 in Japan. Our respective

teams will begin talks prior to our meeting," Trump wrote in a Twitter message

on Tuesday morning.

     Trump has threatened to extend 25% tariffs to another $325 billion of

Chinese goods unless President Xi Jinping meets him at the G20, accusing China

of illegal subsidies and theft of intellectual property. The prospect of a

growing trade war between the world's two largest economies has led the Fed and

ECB to consider interest-rate cuts and sent bond yields tumbling.

     Fresh stimulus from other central banks like the ECB are a different way

other nations are cheating the U.S., Trump wrote in another tweet. "Mario Draghi

just announced more stimulus could come, which immediately dropped the Euro

against the Dollar, making it unfairly easier for them to compete against the

USA. They have been getting away with this for years, along with China and

others," Trump wrote.

     ECB President Draghi said Tuesday that "further cuts in policy interest

rates and mitigating measures to contain any side effects remain part of our

tools." The economic risks are "tilted to the downside" and there are signs of

"lingering softness" over the next few quarters.

     China is signaling it may not add new monetary stimulus and is prepared for

a trade war if the U.S. forces one.

     --CHINA "PREPARED" FOR TRADE WAR

     The PBOC is unlikely to lower interest rates even if the Fed cuts rates

this year, the China Securities Journal said in a commentary today. If the PBOC

follows the Fed to cut rates, it may not boost the real economy but instead

increase the risk of asset price inflation, the newspaper warned. China should

maintain monetary policy independence because its economic fundamentals are not

synchronized with the U.S., the commentary added.

     Another commentary in the Global Times late Monday said China is

well-prepared for a protracted trade war with the U.S. The newspaper described

the trade war as a battle against China's human rights and an act of hegemony by

the U.S., but said that regardless of Washington's actions, the prosperity of

the Chinese people would continue to increase.

     Tariffs shouldn't be the dominant tool the U.S. uses to solve trade

disputes, members of the Senate Finance Committee told Trump's top trade

negotiator Bob Lighthizer on Tuesday.

     Chairman Chuck Grassley, an Iowa Republican, said as the hearing began that

while illegal trade practices from nations such as China should be punished,

tariffs should be a "last resort." Ron Wyden, an Oregon Democrat, said tariffs

"will raise the cost of everyday goods in America" and it would be better to

build international pressure against China's "trade rip-offs."

     Lighthizer said at the hearing that China's trade practices are unfair and

the U.S. is prepared to expand tariffs unless a good deal can be reached.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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