Markets fall after Trump threatens to hike China tariffs

U.S. President Donald Trump second right and China's President Xi Jinping second left attend their bilateral meeting at the G20 Summit in Buenos Aires Argentina. A U.S.-Chinese cease-fire on tariffs gives jitter

Trump previously delayed increasing tariffs on $200 billion in goods to 25 percent from 10 percent after agreeing to a December 1 truce with Chinese President Xi Jinping to give negotiators time to work out a comprehensive agreement.

His support for Trump's approach to China stood in contrast to Democratic frontrunner Joe Biden, who said last week that the world's second largest economy is "not competition" to the United States and claims that Beijing is going to "eat our lunch" are totally overblown.

The offshore yuan fell as much as 1.3 percent to 6.8218 per dollar, its lowest since January 10, before trading at 6.7968 as of 1:34 p.m. Hong Kong time. "Trump realizes the Chinese economy is facing a rough patch, and Xi Jinping is under pressure from his own people".

Pressure tactic or genuine roadblock? Analysts said Trump's comments might be a negotiating tactic, but might also make Beijing reluctant to appear as if it was giving in to US demands.

Hours later, Foreign ministry spokesman Geng Shuang told reporters that China is "trying to get more information" about Trump's comments about new tariffs but stressed that Beijing's negotiating team is still preparing to travel to the USA for talks this week. The other sticking points are how to enforce an eventual deal and the fate of the existing U.S. tariffs on Chinese goods that Beijing wants removed. Seemingly out of nowhere, after weeks of encouraging press coverage that seemed to suggest the two sides were zeroing in on a deal, Trump said that he would hike tariffs by the end of the week, blaming China for dragging its feet. The White House and the U.S. Trade Representative's Office declined to comment.

One tweet by user "Swedenhermit", translated from the original Chinese, reads: "After Trump tweeted about raising tariffs (on Chinese goods), Chinese netizens on Twitter are all celebrating and praising this".

The issue, according to the Bloomberg report on Monday, centers on whether the text of a trade agreement will specify that China must change domestic laws.

"That in our view is unacceptable", he said.

Washington also wants more access to China's vast markets for U.S. companies, curbs on industrial subsidies and increased purchases of American products.

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The U.S. president reiterated his frustration on Monday, saying, 'The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade.

The tweet continues, "of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%".

"We are also in the process of understanding the relevant situation", he said.

Sen. John Cornyn (R-Tex.) similarly said nothing was resolved at the meeting with Trump.

The two countries are engaged in high-stakes commercial combat over China's aggressive push to establish Chinese companies as world leaders in cutting-edge fields such as robotics and electric vehicles. Beijing, however, did not clarify if Chinese Vice Premier Liu He would be part of the delegation, as initially planned.

"China is considering cancelling trade talks that are to resume in Washington starting Wednesday", The Wall Street Journal reported Sunday quoting unnamed sources.

Mnuchin told reporters that it became clear over the weekend that Chinese negotiators were trying to "go back on language that had been previously negotiated, very clear language, that had the potential of changing the deal dramatically".

According to Chinese political and economic analyst Qin Peng, after Trump's surprising tweets, the first two Chinese departments that reacted were the Chinese Propaganda Ministry and Central Cyberspace Affairs Commission.

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