(Bloomberg) — Treasury Secretary Steven Mnuchin said the U.S. remains open to continued negotiations with China on trade — just don’t expect any break through this weekend.
Mnuchin is scheduled to meet with China’s top central banker, Yi Gang, on the sidelines of the Group of 20 finance ministers’ summit in Japan this weekend, giving him a chance to break an impasse after talks broke down last month.
He pointed out that “this is not a negotiating meeting,” even as he signaled a willingness to get talks rolling again.
“If they want to come back to the table and have a real agreement we will negotiate. If not, we’ll go forward with our plan” to impose more tariffs, Mnuchin said during a briefing Saturday in Fukuoka, Japan.
Asked about China’s currency, he attributed its recent decline to market forces and the absence of intervention. “When you have intervention in a market for a long period of time and then they don’t intervene, the market could view that as a desire to have the currency weaken,” he said.
The Treasury Department issued its semi-annual foreign-exchange report to Congress last week, in which no country was named as a manipulator. China remains on its watch-list.
U.S. and Chinese talks broke down last month, which Mnuchin has said happened because Beijing reneged on provisions of a tentative deal. President Donald Trump raised tariffs on about $200 billion in Chinese imports to 25% in response, and at the time hung out the possibility of further action.
China has blamed the U.S. for the breakdown and vowed to reciprocate for the increased tariffs in various ways. The country has hinted at cutting off the U.S. supply of rare earth elements and is also hitting America’s education and tourist sector by announcing visa restrictions.
“I don’t think it’s a breakdown in trust,” Mnuchin said, referring to U.S.-China talks reaching stalemate last month.
Trump has said he’ll decide whether to enact tariffs on another $325 billion in Chinese imports after the G-20 leaders’ summit in Osaka at the end of the month, where he’s expected to meet with Chinese President Xi Jinping. The “main progress” will be at that meeting, Mnuchin said Saturday.
China’s central bank governor, Yi Gang, said in a Bloomberg interview his meeting with Mnuchin will be a “productive talk, as always,” though the topic of the trade war would be “uncertain and difficult.”
Winners and losers
While the trade war has unnerved investors, U.S. economic growth has continued. The unemployment rate is the lowest since 1969 and so far inflation data shows that consumers haven’t felt pressure from rising prices.
”People talk about the economic risk of trade wars” however “they should be even more focused on the benefits of having a great trade agreement,” Mnuchin said, noting that there’s no evidence of the U.S. economy taking a hit from tariffs.
“If anything I would say as a result of tariffs on China there are a lot of companies that are moving that production to other countries that I think will be a big boom for those economies, there will be winners and losers, there are clearly countries that will be big beneficiaries on movement” of production, he said.
Not everyone is as sanguine about the economic impact of the trade tensions.
In separate comments this week, Fed Chair Jerome Powell and his No. 2, Richard Clarida, reassured nervous investors they’re watching closely for signs that disputes between the U.S. and its trading partners are denting the outlook for the world’s largest economy. Their remarks moved the Fed slightly closer to its first rate cut since 2008.
Mnuchin heads into his meeting with Yi after a week of globe-trotting with Trump. On Monday he attended a banquet at Buckingham Palace in London, escorted in by Kate Middleton, the Duchess of Cambridge. Later in the week he visited France to pay tribute to veterans who stormed the beaches of Normandy 75 years ago during World War II.