The WSJ reported that Chinese government may reject to re-start trade talks with the US if Trump imposes new tariffs. An unnamed Chinese official was quoted saying the country would not negotiation “with a gun pointed to its head”. In addition, other unnamed officials said China could impose export retraints on some supplies needed by US businesses, to disrupt their supply chain.
The news followed shortly after report that Trump is going to kick start new tariffs (10% rather than 25%) on USD 200B in Chinese imports, as soon as Monday. Last week, Treasury Secretary Steven Mnuchin proposed to have a meeting involving Chinese Vice Premier Liu He on around September 20. It doesn’t matter if the new round of tariffs are imposed before or after the meeting. As long as they are imposed, anything agreed during the meeting will not take effect for sure.
Separately, the PBoC surprisingly injected CNY 265B in liquidity to the markets via its one-year medium-term lending facility (MLF) today. Interest rate was unchanged at 3.30%. It’s an unexpected move because no MLF loans were due to expire today.