By Clay Chandler and Eamon Barrett
February 16, 2019

“U.S. Stocks End Week Higher Boosted by Trade Talk” blared the headline on Bloomberg’s Friday market wrap. The story, typical of many in the global financial press this past week, noted that U.S. equities have surged to a 10-week high, and that the S&P has posted its third straight weekly gain “on reports that the U.S. and China have reached consensus in principle on the main topics in their trade negotiations.”

The key words in that last sentence, of course, are “in principle.” But never mind. Investors, according to many accounts, are newly chuffed by Donald Trump’s declaration—the second in a week—that he’s willing to suspend his March 1 deadline for slapping higher tariffs on $200 billion in U.S. imports from China if trade negotiators from the two countries move closer to a deal.

“It’s going extremely well,” Trump told reporters at the White House yesterday. “Who knows what (that) means because it only matters if we get it done. But we’re very much working very closely with China and President Xi, who I respect a lot, very good relationship that we have, and we’re a lot closer than we ever were in this country with having a real trade deal.” (A few more keywords: “Who knows what that means.”)

China’s state-controlled Peoples’ Daily chortled that a U.S. trade delegation, led by Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, has “made important progress” during two days of meetings with Chinese counterparts in Beijing this week—and that, as Chinese negotiators head to Washington next week for a round of follow-up discussions, the two sides are making a “final sprint” towards the finish line.

And yet there is scant detail about how and where all that “progress” is being made. The Wall Street Journal reported Thursday that China has floated a proposal to increase sales of U.S. semiconductors to China over six years to a total of $200 billion. That proposal comes on top of earlier Chinese promises to ramp up Chinese purchases of American soy beans and natural gas.

U.S. chip makers are pouring cold water on China’s offer. “This semiconductor purchase pledge is a distraction and too clever by a half,” U.S. Semiconductor Industry Association chief executive John Neuffer told the Journal, who dismissed the proposal as an “accounting gimmick designed to help China achieve its Made-in-China 2025 goals.”

Evidence to date suggests that, after months of haggling, China hasn’t budged an inch on U.S. calls for structural reforms that would eliminate subsidies to China’s state-owned enterprises. Nor has Being agreed to concrete actions to curb rampant theft of American technologies. Trump has vowed that he’ll reject any deal that lacks significant Chinese concessions on both points.

Even so, White House officials already are discussing a mid-March meeting between Trump and Chinese president Xi Jinping at Trump’s Mar-a-Lago resort where the two leaders would announce a final deal.

Meanwhile, the South China Morning Post reports that Chinese officials are pressing for a “parallel dialogue” to secure the release of Huawei Technology CFO Meng Wanzhou, detained in Vancouver pending extradition to the U.S. on fraud charges.

More China news below.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

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