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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
"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: email@example.com