G7: China, US extend olive branch on tariff war

Donald Trump has flagged a resumption of talks with China in a bid to avoid a dangerous escalation of the trade war.

Brigitte Macron kisses US President Donald Trump as G7 leaders and guests gather for a picture in front of the Biarritz lighthouse. Picture: Getty

Donald Trump has flagged a resumption of talks with China after Beijing extended an olive branch in a bid to avoid a dangerous escalation of the trade war.

Mr Trump’s softer rhetoric on China, and conciliatory comments from China’s top trade negotiator, Vice-Premier Liu He, helped pull global sharemarkets back from the brink, but not before ­uncertainty over the trade dispute saw $26 billion wiped off the Australian market and sent the dollar sharply lower.

Mr Trump used the G7 summit in ­Biarritz, France, to raise the prospect of the US returning to trade negotiations and claimed Beijing had called American officials to ask them to “get back to the table”.

“They (China) want to make a deal,” Mr Trump said. “We are going to start talking very ­seriously. They’ve been hurt very badly, but they understand this is the right thing to do.

“This is a very positive development for the world.”

However Mr Trump’s optimism sowed some confusion, with the spokesman for the Chinese Foreign Ministry, Geng Shuang saying he was “not aware of” such a phone call by China to the US.

MORE: US, China extend olive branch in tariff war

Asked later in the day to clarify who the calls were with, Mr Trump said: “I don’t want to talk about calls. We’ve had calls. We’ve had calls at the highest levels.”

But Mr Liu indicated a possible thawing of tensions, telling the opening of the 2019 Smart China Expo in Chongqing earlier yesterday that Beijing was willing to resolve the dispute “through negotiation and co-operation in a calm manner”.

“We firmly oppose the escalation of the trade war,” said Mr Liu, according to a report by Chinese news outlet Caixin.

“We think an escalation of the trade war is against the interest of China, the US and the entire world.”

The comment was the first clear sign from Beijing that it would try to keep a cool head des­pite last week’s tweets by Mr Trump about the imposition of new tariffs on Chinese goods and his threat to pull US companies out of China.

Scott Morrison said last night he welcomed the pledges to scale back the trade war, but said such promises had been made before.

“I’m always hopeful that they can come to an arrangement. But I’m always mindful that we have been here before,” the Prime Minister said before departing Biarritz.

“I’m pleased China has responded. This issue is having an obvious impact on the global economy.”

Mr Morrison lent partial support to Mr Trump over the ­ trade war, saying the US had “legitimate ­issues” to raise with Beijing.

Mr Morrison has pushed for the dispute to be resolved quickly and noted the collateral damage to the Australian economy posed by the trade conflict.

He said he had raised the trade war during a 20-minute meeting with Mr Trump, after which the US President humorously referred to him as “the King of Australia”.

Australia’s S&P/ASX 200 finished yesterday’s session down 1.3 per cent, or 83 points, at 6440 points. Earlier, the market was down by as much as 1.7 per cent — or more than $32bn — after the US Dow Jones Industrial Index fell 2.4 per cent on Friday.

Shares across Asia were sharply lower yesterday. China’s Shanghai Composite Index shed 1.1 per cent while Hong Kong’s Hang Seng fell almost 2 per cent as pro-­democracy demonstrations continued. Bond markets and currencies around the world were volatile.

The Australian 10-year bond yield fell to a record of 0.857 per cent and gold futures moved higher again to approach $US1600 per ounce. The Australian dollar slipped to a two-week low of US66.90c, before recovering ground to trade at US67.53c

Reserve Bank governor Philip Lowe told a meeting of central bankers on the weekend that “political shocks” were becoming “economic shocks”.

With The Wall St Journal