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US Treasury Mnuchin in Trade Talk with China, But No One is Cheering Yet

 The financial markets opened the week rather quietly. Nikkei and KOSPI opened lower and turned black as the session went on. But other major Asian indices stayed slightly in red. US is apparent in talk with China on trade agreement. But no one in the markets is cheering for it at this stage. In the currency markets, commodity currencies are generally higher. New Zealand dollar is leading the way on solid trade performance in February. Yen is paring its recent gains broadly as risk aversion is not intensifying. Markets could turn more quiet in a holiday shortened week.

The financial markets opened the week rather quietly. Nikkei and KOSPI opened lower and turned black as the session went on. But other major Asian indices stayed slightly in red. US is apparent in talk with China on trade agreement. But no one in the markets is cheering for it at this stage. In the currency markets, commodity currencies are generally higher. New Zealand dollar is leading the way on solid trade performance in February. Yen is paring its recent gains broadly as risk aversion is not intensifying. Markets could turn more quiet in a holiday shortened week.

Mnuchin in “very productive conversations” with China on trade agreement to avert Section 301 tariffs

US Treasury Secretary Steven Mnuchin said in a Fox News Sunday interview that the US is having “very productive conversations” with China. And he’s “cautiously hopeful we can reach an agreement” to avert the tariffs on USD 50-60b announced last week. Mnuchin noted that both countries agreed on reducing the US trade deficit to China. And, they were trying “to see if we can reach an agreement as to what fair trade is for them to open up their markets, reduce their tariffs, stop forced technology transfer.”

But Mnuchin emphasized that the US is still on track to impose the Section 301 tariffs unless there is an “acceptable agreement” for Trump to sign off on. He also noted that “we’re not afraid of a trade war, but that’s not our objective.” And, “in a negotiation you have to be prepared to take action.”

Separately, the WSJ reported that Mnuchin and US Trade Representative Robert Lighthizer sent a letter to Chinese Vice Premier Liu He last week, detailing the list of specific request for China. And the list is reported to include reduction of Chinese tariffs on US vehicles, purchases of semiconductor products and larger access to China’s financial markets.

South Korea the first that got indefinite exemption on US steel tariffs

The South Korea’s Ministry of Trade said today that is’ exempted from the US steel and aluminum tariffs. However, South Korea now received a quota of around 2.68m tonnes of steel exports. And that is 70% of the annual average of Korean steel exports to the US between 2015-2017. South Korean contributed to 9.7% of US steel imports in 2017. In the mean time, Both countries also agreed on 20-year extension of Korean pickup trucks, until 2041. US automakers could also bring in 50000 vehicles to South Korean annually, doubling from prior amount of 25000.

 

That is the first of many US allies to receive an indefinite exemption on the steel and aluminum tariffs. Other six, Argentina, Australia, Brazil, Canada, Mexico and EU are just having the tariffs temporarily suspended. At this point, there is no news regarding the exemption on Japan and Taiwan, two other major US allies in Asia, yet.