* Trump says to raise U.S. tariffs on $200 bln of Chinesegoods
* Beijing says still trying to understand the situation
* China vice premier due in Washington this week, may not go
*
By Ben Blanchard and Jeff MasonBEIJING/WASHINGTON, May 6 (Reuters) - China said on Mondaythat a delegation was still preparing to go to the United Statesfor trade talks, even as U.S. President Donald Trumpdramatically increased pressure on Beijing to reach a deal,saying he would hike tariffs on Chinese goods this week.Trump's comments on Sunday marked a major escalation intensions between the world's two largest economies, and a shiftin tone from the president, who as recently as Friday had citedprogress toward a deal.Stock markets sank and oil prices tumbled on his remarks, asnegotiations to end the months-long trade war were thrown intodoubt. "We are also in the process of understanding the relevantsituation. What I can tell you is that China's team is preparingto go to the United States for the discussions," Chinese ForeignMinistry spokesman Geng Shuang told a news briefing.
But Geng did not say if Vice Premier Liu He, who is China'slead official in the negotiations, will be part of thedelegation as originally planned. Negotiations are set to startMay 8 in Washington.
"What is of vital importance is that we still hope theUnited States can work hard with China to meet each other halfway, and strive to reach a mutually beneficial, win-winagreement on the basis of mutual respect," Geng said.
The Wall Street Journal reported earlier that China wasconsidering cancelling this week's meetings in Washington inlight of Trump's comments, which took Chinese officials bysurprise.Trump appeared to defend his decision in a tweet early
Monday, slamming the U.S.-China trade deficit and vowing not tolose out to Beijing. A less-than-rosy update from U.S. Trade RepresentativeRobert Lighthizer, including details that China was pulling backfrom some previous commitments, prompted Trump's weekenddecision."The Trade Deal with China continues, but too slowly, asthey attempt to renegotiate. No!" Trump said in a tweet.Trump said tariffs on $200 billion of goods would increaseon Friday to 25 percent from 10 percent, reversing a decision hemade in February to keep them at 10 percent due to progressbetween the two sides.The president also said he would target a further $325billion of Chinese goods with 25 percent tariffs "shortly,"essentially covering all products imported to the United Statesfrom China.
'ATMOSPHERE HAS CHANGED'U.S. officials did not weigh in on whether they expectedtalks to go ahead this week. The White House and the U.S. TradeRepresentative's Office declined to comment. China's commerceministry did not immediately respond to a request for comment."The atmosphere of the negotiations has changed," said aChinese official with knowledge of the situation.
Whether and how the talks proceed are being re-evaluated,the official told Reuters on condition of anonymity.
"All that depends on the attitude of the United States," theofficial said.Chinese news outlets have been told not to independentlyreport on Trump's tweets, and instead adhere to any report fromthe official Xinhua news agency, said a source with directknowledge of the matter.
Global financial markets, which had been expecting news of atrade deal soon, went into a tailspin. U.S. equity futures fellmore than 2 percent and stocks across trade-reliant Asiatumbled. China's main indexes slid 5 percent."There is still a question of whether this is one of thefamous Trump negotiation tactics, or are we really going to seesome drastic increase in tariffs," said Nick Twidale,Sydney-based analyst at Rakuten Securities Australia. "If it'sthe latter, we'll see massive downside pressure across allmarkets."Mindful of his 2020 re-election bid, Trump had alsosuggested the duties were not leading to price increases forU.S. consumers. "The Tariffs paid to the USA have had littleimpact on product cost, mostly borne by China," he tweeted.Tariffs on Chinese goods are actually paid to the UnitedStates by companies that import the goods, and most of thosecompanies are U.S.-based. American businesses, while supportiveof Trump's crackdown on China's trade practices, are eager forthe tariffs to be removed, not expanded."Raising tariffs means raising taxes on millions of Americanfamilies and inviting further retaliation on American farmers,"said Christin Fernandez, a spokeswoman for the Retail IndustryLeaders Association.
'HANG TOUGH'Nevertheless, the president's aggressive strategy drew rarebipartisan support from U.S. Senate Democratic leader ChuckSchumer, who urged Trump to "hang tough" in a tweet: "Don't backdown. Strength is the only way to win with China."One Chinese trade expert said recent signs of resilience inboth economies were breeding over-confidence.
"The urgency is gone. So, it's likely to see a longer tradewar," the expert said, speaking on condition of anonymity due tothe sensitivity of the topic.The trade war resulted in billions of dollars in losses forboth sides in 2018, hitting autos, technology and above all,agriculture, while inflicting collateral damage onexport-reliant economies and companies from Japan to Germany.On Friday, Trump said talks with China were going well. Last week, industry sources said they believed the talkswere in the end game, but a Trump administration official saidaides had told the president that significant hurdles remained.The increase in U.S. tariffs on Friday would be the firstsince Trump imposed 10 percent tariffs on $200 billion ofChinese goods in September, coming on top of 25 percent tariffson $50 billion of goods enacted earlier last year.
Negotiations about tariffs have been one of the remainingsticking points between the two sides. China wants the tariffsto be removed, while Trump wants to keep some, if not all, aspart of any final deal to ensure China lives up to itscommitments, a White House official said on Sunday.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Trump delays tariff hike on Chinese goods, citing trade talkprogress Trump 'firm' on China structural demands, tariffs part ofenforcement -Pence FACTBOX-Tariff wars: duties imposed by Trump and U.S. tradingpartners EXPLAINER-Who pays Trump's tariffs - China and other exportersor U.S. customers? ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Jeff Mason, David Shepardson, Timothy Gardner,Lawrence Hurley and Makini Brice in Washington; Sinead Carew inNew York; and Ben Blanchard, Michael Martina, Shu Zhang, JingXu, Cheng Leng and Yawen Chen in Beijing; Editing by SimonCameron-Moore and Jeffrey Benkoe)
@jeffmason1; Reuters Messaging:jeff.mason.thomsonreuters.com@thomsonreuters.net)) Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.