China presses US to cancel tariffs in test of bilateral engagement

Reuters came out with the details of US Trade Representative (USTR) Katherine Tai and China's Vice Premier Liu He’s latest virtual talks during the weekend.

“China said on Saturday it pressed the United States to eliminate tariffs in talks between the countries' top trade officials that Washington saw as a test of bilateral engagement between the world's biggest economies,” said the news.

The meeting gained attention after USTR Tai announced the last Monday that she would seek "frank" talks and hold China to its commitments under a 'Phase 1' trade deal negotiated by former President Donald Trump, highlighted Reuters.

Xinhua had its version of the update while saying, "The Chinese side negotiated over the cancellation of tariffs and sanctions, and clarified its position on China's economic development model and industrial policies."  The Chinese media added, “Both sides agree to continue communicating with an equal approach and mutual respect, and to create the conditions for the healthy development of economic and trade relations between the two countries and the recovery of the world economy.”

Reuters quotes a USTR official as saying, “Tai intended to use the call, the second between the two, to test whether bilateral engagement can address U.S. complaints about Beijing's trade and subsidy practices.”

“Tai's future engagement with China would depend on "how China responds to tonight's call" and declined to discuss possible next steps, but added that Tai would not seek Phase 2 negotiations,” added the official per Reuters.

FX implications

The news should ideally weigh on the market sentiment as it roils the previously calm US-China tussles, likely challenging the Antipodeans. However, an off in the US restricts the market’s reaction to the news.