U.S., China fail to agree on trade issues, casting doubt on other issues

Reuters




* No new major steps to reduce U.S. trade deficit with China
    * China, U.S. say still share lower trade deficit goal
    * China says will expand cooperation in services, trade
    * U.S. business disappointed with trade talk deadlock
    * Fears U.S. may impose steel tariffs, quotas on China

 (Adds Chinese statement, comment from business group)
    By David Lawder and Lesley WroughtonWASHINGTON, July 19 (Reuters) - The United States and China
failed on Wednesday to agree on major new steps to reduce the
U.S. trade deficit with China, casting doubt over President
Donald Trump's economic and security relations with Beijing.
    The annual economic dialogue session in Washington ended
with canceled news conferences, no joint statement and no new
announcements on U.S. market access to China.
    The two sides had a "frank exchange" but failed to agree on
most major bilateral trade and economic issues that were
important to the United States, a senior U.S. official said on
condition of anonymity because he was not authorized to speak
publicly.
    These included U.S. demands for access to China's financial
services markets, reducing excess Chinese steel capacity,
reductions in auto tariffs, cutting subsidies for state-owned
enterprises, ending Chinese requirements for data localization
and lifting ownership caps for foreign firms in China, the
official said.
    "China acknowledged our shared objective to reduce the trade
deficit which both sides will work cooperatively to achieve,"
 U.S. Treasury Secretary Steven Mnuchin and U.S. Commerce
Secretary Wilbur Ross said in a brief statement, highlighting a
rare point of consensus.
    The Chinese embassy in Washington cast the talks in a
positive light, saying in a statement that both sides had
acknowledged "significant progress" on the 100-day talks and
would to work together to reduce the trade deficit.
    "The two sides will expand areas of cooperation in services
and increase trade in services; expand mutual investment, and
create a more open, equitable, transparent and convenient
investment environment," the embassy said.

    FAR FROM MAR-A-LAGO
    The session had been billed as a follow-up to Trump's first
meeting with Chinese President Xi Jinping at his Mar-A-Lago,
Florida, estate in April when Trump hailed Xi's cooperation in
curbing the threat from North Korea. Trump said that this would
lead to better trade terms for China.
    The two leaders launched a 100-day economic plan that has
produced some industry-specific announcements, including the
resumption of American beef sales in China and pledged to grant
limited U.S. access to some financial services sectors.
    But there have been no new initiatives since, and Trump has
grown increasingly frustrated with China's lack of pressure on
North Korea. His administration has threatened new sanctions on
small Chinese banks and other firms doing business with
Pyongyang. [nL8N1K36D2]
    Ross and Mnuchin said the U.S. position on the China trade
relationship would be guided by "the principles of balance,
fairness, and reciprocity on matters of trade will continue to
guide the American position so we can give American workers and
businesses an opportunity to compete on a level playing field."
    China's delegation leader, Vice Premier Wang Yang, left the
Treasury building without speaking to reporters. Earlier, he had
warned that confrontation between the two countries would be
damaging. [nW1N1D90L5]

    STEEL RALLY
    Investors interpreted the negative signals from the talks
and lack of new trade announcements as making it more likely
that Trump would forge ahead with broad steel tariffs or quotas
based on a national security review, sending steelmakers' shares
soaring. [nL1N1KA1MM]
    Shares of United States Steel Corp <X.N> closed up 4.8
percent, while AK Steel <AKS.N> rose 3.6 percent and Nucor
<NUE.N> rose 2.2 percent.
    Trump, asked by a reporter at the White House after the
stock market closed whether he would impose steel tariffs, said:
"Could happen."
    Potential steel tariffs, which could be announced in the
coming weeks, were expected to be a difficult topic in the
U.S.-China talks. Ross has blamed massive Chinese excess
capacity for a global steel glut that is hurting U.S. producers.
    Wednesday's deadlock was unsettling for U.S. business groups
that had hoped to put more cracks in Beijing's market access
barriers and obviate more aggressive measures from the White
House that could destabilize trade ties.
    "We are disappointed the Comprehensive Economic Dialogue
ended at an apparent impasse. It is important for governments to
take tangible steps to address long-standing issues and ensure
the commercial relationship remains a source of stability in the
overall relationship," said Jacob Parker, vice president of
China operations at the U.S.-China Business Council.
    Even if the U.S. and Chinese governments fail to agree on
more substantive trade terms, corporate chief executive officers
from the two countries pledged to deepen their cooperation and
joint investment efforts.
    Led by Blackstone Group <BX.N> CEO Stephen Schwarzman and
Alibaba Group <BABA.N> CEO Jack Ma, a group of 20 executives
said they were committing to increase bilateral trade, including
the export of U.S. agricultural goods, liquefied natural gas and
consumer products to China.
    "A stable, growing economic relationship between the United
States and China is mutually beneficial to the people of our two
countries and for the world," Ma and Schwarzman said in a
statement.

 (Additional reporting by Noel Randewich in San Francisco and
Michael Martina in Beijing; Editing by James Dalgleish, Leslie
Adler and Michael Perry)
 ((David.Lawder@tr.com; +1 202 354 5854; Reuters Messaging:
david.lawder.thomsonreuters.com@reuters.net))

Keywords: USA CHINA/E*TRADE (UPDATE 7)





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