Signing of Hong Kong bill could sour US-China trade relations

US-China relations will sour if President Donald Trump signs a pro-Hong Kong rights bill into law and could possibly negatively impact the ongoing bilateral trade talks aimed to reaching a so-called “phase one” deal.

A former American ambassador to China, Max Baucus, told CNBC on Thursday: “I don’t think this bill is going to help protesters achieve their goals. Second, it has an impact on U.S.-China relations. I think this is going to worsen relations.”

On Wednesday, the house passed a pro-Hong Kong rights bill, putting President Trump in a bind, as he tries not to roil the high-stakes trade talks with China.

Nevertheless, a former US diplomat to Beijing told CNBC on Wednesday that he still expected a “phase one” deal between China and the US to get done.

“If there is a phase one trade deal in the offing, it’s almost certainly going to be a deal largely on Beijing’s terms; something that Beijing will want — purchases and promises, not a deal reckoning on the structural process,” said Robert Daly, director of the Wilson Center’s Kissinger Institute on China and the United States.

“China would want that deal even if it felt insulted over Hong Kong,” he added

Asian stocks were mostly lower on Thursday as investors' concerns mounted over possible setbacks in trade talks. In afternoon trading in the region, Hong Kong’s Hang Seng index was down 1.7%.

In remarks to the Financial Times, some traders linked the weakness in the region's stock markets to a Reuters report published on Thursday evening according to which a “phase one” trade deal between Washington and Beijing may not be signed until next year, as Chinese negotiators push for a roll-back in tariffs.