Chinese officials grow more pessimistic on chances of US-China trade deal

CNBC's Eunice Yoon said in a post on Twitter: "Mood in Beijing about #trade deal is pessimistic, government source tells me.

"#China troubled after Trump said no tariff rollback. (China thought both had agreed in principle.) Strategy now to talk but wait due to impeachment, US election. Also prioritize China economic support."

On 7 November, Chinese commerce ministry spokesman Gao Feng had announced that both sides had agreed to rollback "additional trade tariffs in phases as progress is made on the agreement", but Donald Trump had later denied that was the case.

"If China, US reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement," Gao had said at the time, according to a translation of his remarks by Bloomberg.

The same source cited by Yoon also said that officials in China were now wondering whether it might not make more sense to wait until the result of the US presidential elections and of the impeachment hearings on Capitol Hill "as it is unclear what Trump's standing will be even in a few months."

CNBC said that the US and China were at odds over the exact quantity of agricultural good purchases that Beijing should commit to, with that same source also telling the broadcaster that part of the reason behind Chinese resistance was concern that they might alienate other trading partners.

Earlier on Monday, China's ministry of commerce had issued a statement saying that at Washington's request, on Saturday, Chinese vice premier, Liu He, had spoken with US Treasury Secretary, Steve Mnuchin, and America's Trade Representative, Robert Lighthizer.

The commerce ministry also said that the two sides had held "constructive discussions".

Ahead of the latest US-China trade news, in research note sent to clients on 15 November, economists at Bank of America-Merrill Lynch had argued that a "skinny deal" between the US and China was likely, "due to rising economic pain and reluctance to pursue politically risky consumer tariffs in an election year."

Nonetheless, recent improved economic data and gains in the stockmarket meant there was "some risk that the deal falls apart".

"[We] remind readers why the trade war started in the first place: a desire for fair, reciprocal trade and a sharp reduction in the trade deficit.

"By that metric there is a huge amount of unfinished business. First, the target was to add 3% GDP by eliminating the trade deficit, but the deficit is still 3.1% of GDP (Chart of the day).

"Second, key bilateral imbalances in autos and with China, Mexico, Europe, Japan and Korea either remain large or are growing. Third, the dollar is strong, manufacturing jobs remain well below 2008 peaks and the US continues to get limited help from the WTO."