Trade Negotiation In Jeopardy After China Reneged On Its Commitment

Over the weekend, President Trump sent a pair of tweets threatening to increase tariffs from 10% to 25% on $200 billion of Chinese goods. This increase will happen on Friday this week. In addition, Trump also said he will implement 25% tariff on $325 billion additional Chinese goods.

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Trump sent a pair of tweets again today provoking China by saying he's very happy with the additional tariffs

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These tweets left no room for the U.S. to back down. U.S. Trade Representative Robert Lighthizer also made it clear that additional tariffs will apply this Friday despite the ongoing talk. Lighthizer is one of China hawks in Trump administration. He has pushed for an enforcement mechanism

News start to surface that the U.S. lose their patience after China backtracks their commitments to address U.S. complaints. Beijing returned a draft agreement to Washington late on Friday night with reversal to concessions on core U.S demands. The U.S. complaints center on the areas of intellectual property and forced technology transfer. There are several other areas such as market access for cloud computing firm and also currency manipulation. China has apparently gone back on all the major concessions it had made during the negotiation.

Chinese negotiators said they could not change the domestic laws, as such changes will be major and can't be done quickly. They also accuse the U.S demands becoming harsher as the negotiations drag on. Vice Premier Liu He will still visit Washington on Thursday, but the odds that the two sides can reconcile after this event seems to be slim at this stage.

For months, investors and market seem to believe that the two largest economies are close to making a deal. The markets are trading at a near high or all-time high when President Trump sent the tweet on Sunday. The news immediately sent the stock market and commodities into free fall on Monday open. The sell-off can keep going if there's no deal by Friday.

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