Trump says China trade deal is possible as tariff hike nears

US President Donald Trump on Thursday insisted a trade deal with China was still possible to reach this week, even as he reiterated plans to raise tariffs on Chinese goods within hours.

Trump, speaking at an event in Washington, said he may hold a phone call with his Chinese counterpart Xi Jinping, who sent him a letter about working closely together to ease trade tensions. The president spoke as China’s top trade envoy Liu He was due to land in Washington for two days of trade talks, starting at 5 p.m. on Thursday.

“He just wrote me a beautiful letter, I just received it, and I’ll probably speak to him by phone but look we have two great alternatives, our country is doing fantastically well,” Trump said. “Our alternative is an excellent one, it’s an alternative I’ve spoken about for years. We’ve taken well over $100 billion from China in a year.”

There was no phone call planned between the two leaders as of 1 p.m. Washington time, according to a person familiar with the matter.

U.S. stocks climbed from lows of the day after Trump’s remarks.

Tariff hike

U.S. tariffs on some $200 billion in Chinese goods are set to increase to 25% from 10% as of 12:01 a.m. on Friday, in a move that economists and businesses say risks being the most economically consequential of all of Trump’s tariff moves so far. Trump repeated a threat on Thursday to impose new 25% tariffs on $325 billion of Chinese imports, which aren’t currently covered, saying that his administration has started preparing the paperwork.

The mood on both sides going into the talks had appeared to be hardening with U.S. Trade Representative Robert Lighthizer calling members of Congress to warn that a deal this week is unlikely, according to people familiar with the conversations.

While Trump on Wednesday insisted that Liu was coming to make a deal and dubbed him a “good man,” he later told a rally of supporters that China “broke the deal” by backsliding on prior commitments, leading him to order higher tariffs.

Harder line

China has disputed Trump’s characterisation that the country reneged. But it has also sent its own signals that a deal could take time.

Unlike in some of his previous visits to Washington, Liu is not traveling with the designation “special envoy” of Xi, according to people briefed on his trip. Chinese officials’ public statements have also hardened in recent days with Beijing vowing to retaliate against Trump’s tariff increase and rejecting the idea that it has reneged on any commitments made during the months of tough negotiations that have led to this week’s showdown.

“China is credible and honors its word and that has never changed,” Commerce Ministry Spokesman Gao Feng told reporters on Thursday. The Ministry of Commerce also announced it would soon publish details of new retaliatory tariffs.

Data released on Thursday offered Trump a chance to claim his tariff war is yielding the desired result. The U.S. trade deficit with China decreased to the narrowest in almost three years as imports slowed and exports advanced.

“When people looked at the economic numbers, they were shocked. When they look at the import-export numbers they were shocked,” Trump said on Thursday. “Try looking at all of the tariffs that China’s been paying us for the last eight months. Billions and billions of dollars.”

Economists disagree with the president and say the evidence is that American consumers and companies are bearing the costs of his tariffs via higher prices. In a tweet on Thursday, Hu Xijin, editor-in-chief of Global Times, said a Chinese source who is familiar with the trade talks told him that there’s “zero” probability for a deal before Friday. “If it is that bad, the real suspense is whether the two sides will continue negotiations after Friday,” Hu said. Global Times is a tabloid published by the Communist Party’s People’s Daily.