U.S. President Donald Trump on Tuesday held out the possibility of an extension of the 90-day trade truce with China but warned he would revert to tariffs if the two sides could not resolve their differences.
Trump said his team of trade advisers led by China trade hawk U.S. Trade Representative Robert Lighthizer would determine whether a “REAL deal” with Beijing was possible.
“If it is, we will get it done,” Trump wrote in a Twitter post. “But if not remember, I am a Tariff Man.”
The threat of an escalating trade war between the world’s two largest economies has loomed large over financial markets and the global economy for much of the year, and investors initially greeted the ceasefire agreed by Trump and Chinese President Xi Jinping over the weekend with relief.
However, following Monday’s rally, markets on Tuesday sold off as doubts over what could realistically get accomplished in the tight negotiating window added to concerns about fading global growth.
The Dow Jones Industrial Average fell more than 3 percent, the S&P 500 lost 3.2 percent and the Nasdaq Composite tumbled 3.8 percent.
The Republican president appeared to address one of the concerns by indicating he would not be opposed to extending the 90-day truce.
“The negotiations with China have already started. Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina,” Trump tweeted.
Treasury Secretary Steven Mnuchin acknowledged investors’ doubts over the talks’ outcome. “The market is trying to figure out: ‘Is there going to be a real deal at the end of 90 days or not?'” Mnuchin told the Wall Street Journal CEO Council.
Still, the meeting in Buenos Aires marked significant progress, he said, describing upcoming negotiations as historically significant because both leaders had agreed to delve into several specific issues.
White House trade adviser Peter Navarro told Fox News: “We have 90 days to see progress on that and I think it is premature for people to lose faith in that process.”
He said the Chinese delegation to the G20 summit went to Panama after Buenos Aires and haven’t returned to China. “Let’s give this some time.”
Trump and Xi said they would hold off on imposing additional tariffs for 90 days starting on Dec. 1 while they sought to resolve their trade disputes that have seen the flow of hundreds of billions of dollars worth of goods disrupted by tariffs.
Trump has said China is supposed to start buying agricultural products immediately and cut its 40 percent tariffs on U.S. car imports.
While Trump hailed the agreement with Xi “an incredible deal,” a lack of detail from the Chinese side has left investors and analysts wondering if Trump’s exuberance is warranted.
“It doesn’t seem like anything was actually agreed to at the dinner and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality,” JPMorgan Chase said in a trading note.
White House economic adviser Larry Kudlow said on Tuesday that a reduction in Chinese tariffs on U.S. cars and agricultural and energy commodities would be a “litmus test” for whether U.S.-China trade talks were on track.
Washington also expects China to promptly address structural issues including intellectual property theft and forced technology transfers, U.S. officials have said.
White House National Security Adviser John Bolton told the Wall Street Journal event on Tuesday that Chinese theft of U.S. intellectual property was among the administration’s top concerns.
He said the United States should look into a rule that would bar imports of Chinese products that used stolen U.S. intellectual property.
U.S. Representative Steve King, an Iowa Republican, in February 2017 introduced a bill that would have allowed the U.S. government to punish Chinese intellectual property theft by imposing duties on the country’s imports.
The legislation, which was not put to a vote, envisaged using revenue raised by the duties to compensate those harmed by China’s actions.
Trump has long accused China of unfair trade practices that hurt Americans and the U.S. economy.
“When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power,” he said on Tuesday.
His appointment of Lighthizer to lead the talks instead of Treasury Secretary Mnuchin puts one of the administration’s toughest China critics in charge. Trump said on Tuesday that Lighthizer would work closely with Mnuchin, Kudlow and Navarro.