China sees ‘positive’ outcomes as Trump’s tariff deadline nears

Beijing is looking to Washington for “positive” trade outcomes as a tariff truce between the world’s two biggest economies remains in limbo, hours before higher tit-for-tat duties are due to return.

While the United States and China slapped escalating tariffs on each other’s products this year − reaching prohibitive triple-digit levels and snarling trade − both countries in May agreed to temporarily lower these levels.

But their 90-day halt in steeper levies is due to expire Tuesday, with all eyes now on a path forward.

“We hope that the US will work with China to follow the important consensus reached during the phone call between the two heads of state,” said Chinese foreign ministry spokesman Lin Jian in a statement.

He added that Beijing also hopes Washington will “strive for positive outcomes on the basis of equality, respect and mutual benefit.” Although both sides reached a pact to de-escalate tensions after high level talks in Geneva in May, their truce has been shaky.

In June, key economic officials convened in London as disagreements emerged and US officials accused their counterparts of violating the pact. Policymakers again met in Stockholm last month.

But even as both countries appeared to be seeking to push back the reinstatement of duties, US trade envoy Jamieson Greer said last month that President Donald Trump will have the “final call” on any such extension.

Last week, US Commerce Secretary Howard Lutnick said in an interview that it is likely Trump will further the pause by another 90 days.

The White House did not immediately respond to queries on the matter on Monday.

Trump said in a social media post late Sunday that he hoped China will “quickly quadruple its soybean orders,” adding that this would be a way to balance trade with the United States.

For now, fresh US tariffs on Chinese goods this year stand at 30 per cent, while Beijing’s corresponding levy on US products is at 10 per cent.

Since returning to the presidency in January, Trump has slapped a 10-percent “reciprocal” tariff on almost all trading partners, aimed at addressing trade practices Washington deemed unfair.

This surged to varying, steeper levels last Thursday for dozens of economies.

Major partners like the European Union, Japan and South Korea now see a 15-percent US duty on their products, while the level went as high as 41 per cent for Syria.

The “reciprocal” tariffs exclude sectors that have been separately targeted, such as steel and aluminium, and those that are being investigated like pharmaceuticals and semiconductors.

Trump has also taken separate aim at individual countries such as Brazil over the trial of former president Jair Bolsonaro, who is accused of planning a coup, and India over its purchase of Russian oil.

The US dollar edged higher across the board on Monday, a day before the deadline for Washington and Beijing to strike a tariff deal and the release of a US inflation report that could help determine whether the Federal Reserve lowers borrowing costs next month. The dollar index was up 0.3% at 98.50 after last week’s 0.4% fall. Against the yen, the US currency traded at 147.95 , up 0.1%. Japanese markets were closed on Monday for the Mountain Day holiday.

The euro was down 0.2% at $1.1636, while sterling was down 0.3% at $1.34195. “The buck is trading a little firmer against all peers, though the moves are overall modest in nature,” said Michael Brown, market analyst at online broker Pepperstone in London. “A very modest hawkish repricing of Fed policy expectations appears to be helping the move along, likely driven by participants squaring up some positions ahead of the risk that tomorrow’s CPI print presents,” he said. The dollar softened last week as investors adjusted their expectations for interest rate cuts from the Fed after soft data on US jobs and manufacturing. Fed officials have sounded increasingly uneasy about the labour market, signaling their openness to a rate cut as soon as September.

Cooling inflation could cement bets for a cut next month, but if signs emerge that US President Donald Trump’s tariffs are fuelling price rises, that might keep the Fed on hold for now.

“It’s important to note ahead of tomorrow’s data that the bar for a hawkish surprise is higher,” said Francesco Pesole, FX strategist at ING.

Pesole added that a 0.3% monthly rise in core CPI would give the Fed room to lower interest rates, given the deterioration in the labour market.

Economists polled by Reuters expect core CPI to have risen 0.3% in July, pushing the annual rate higher to 3%.

Money market traders are pricing in around a 90% chance of a rate cut next month, while 58 basis points of easing are priced in by year-end, implying two quarter-point cuts and around a one-in-three chance of a third. Personnel moves at the Fed have also weighed on the dollar recently. Trump is preparing to install rate-setters that support his dovish views on monetary policy, including a new chair for when Jerome Powell’s term ends in May. Trade talks were also in focus as Trump’s August 12 deadline for a deal between the US and China neared, particularly on chip policy.

Most market participants expect the U.S.-China trade truce to be extended, Pepperstone’s Brown said.

Agencies