China will never surrender to external pressure, the government said on Monday, though stopped short of announcing how Beijing will hit back after Washington renewed its threat to impose tariffs on all Chinese imports in an escalating trade dispute.
The trade war between the world's top two economies jumped up a gear on Friday, with the United States hiking tariffs on $200 billion worth of Chinese goods after President Donald Trump said Beijing "broke the deal" by reneging on earlier commitments made during months of negotiations.
Trump also ordered U.S. Trade Representative Robert Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect about an additional $300 billion worth of goods.
Beijing has vowed to respond to the latest U.S. tariffs, but has announced no details yet.
"As for the details, please continue to pay attention. Copying a U.S. expression - wait and see," foreign ministry spokesman Geng Shuang told a daily news briefing.
"We have said many times that adding tariffs won't resolve any problem. China will never surrender to external pressure. We have the confidence and the ability to protect our lawful and legitimate rights," Geng added, responding to a question on Trump's threat of putting duties on all Chinese imports.
State media also kept up a steady drum beat of strongly-worded commentary on Monday, reiterating that China's door to talks was always open, but vowing to defend the country's interests and dignity.
"At no time will China forfeit the country's respect, and no one should expect China to swallow bitter fruit that harms its core interests," China's top newspaper, the ruling Communist Party's official People's Daily, said in a commentary.
State television said in a separate commentary that the effect on the Chinese economy from the U.S. tariffs was "totally controllable".
"It's no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger."
Ahead of talks last week, China wanted to delete commitments from a draft agreement that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That move dealt negotiations to resolve the trade dispute a major setback.
Trump has since defended the tariff hike and said he was in "absolutely no rush" to finalize a deal.
White House economic adviser Larry Kudlow said on Sunday that there was a "strong possibility" Trump will meet Chinese President Xi Jinping at a G20 summit in Japan in late June.
China's Huawei Technologies called on Washington to drop the "loser's attitude" and once again rubbished U.S. allegations its gear could be used by Beijing for spying, as its network business weakened amid mounting global scrutiny.
"The U.S. government has a loser's attitude. It wants to smear Huawei because it cannot compete against Huawei," Guo Ping, rotating chairman of the world's top producer of telecoms equipment and No.3 maker of smartphones, said on Friday.
"I hope the U.S. can adjust its attitude," Guo said at a press briefing that was attended by more than 100 journalists from across the world.
The U.S. embassy in China declined to comment.
Huawei reported a slower pace of profit growth for 2018 as its network business saw its first drop in revenue in two years, overshadowing a robust 45 percent jump in its smartphone unit.
Huawei's outlook has come under a cloud over the past year with the United States voicing concerns that its equipment could be used for espionage. Washington has also urged its allies to ban Huawei from building next-generation 5G mobile networks.
The latest blow for the company came on Thursday when Britain rebuked it for failing to fix long-standing security flaws in its mobile network equipment and revealed new "significant technical issues".
For 2018, the Shenzen-based firm reported a net profit of 59.3 billion yuan (£6.9 billion), up 25 percent from a year ago, versus a 28 percent rise in 2017. Revenue from its carrier business fell 1.3 percent to 294 billion yuan, which it blamed on telecommunications industry investment cycles.
However, the surge in its consumer business sales to a record 348.9 billion yuan, driven by demand for its premium smartphone models such as the P series and Mate series, helped push global revenue to above $100 billion for the first time.
Its total revenue rose nearly 20 percent to about 721 billion yuan, marking the fastest pace of growth in two years. The performance of consumer business was in line with what Huawei flagged in January, when it also said it could become the world's biggest-selling smartphone vendor this year.
Guo said he expects all three business groups - consumer, carrier and enterprise - to post double-digit growth this year, although he did not provide a specific number. The company has previously said it was targeting total revenue of $125 billion this year, a record high.
"Moving forward, we will do everything we can to shake off outside distractions, improve management and make progress towards our strategic goals," Guo said.
Huawei has "prepared some inventories for uncertainties" that has reduced its net cash position, Guo added, without giving any details.
SPYING WOULD BE "SUICIDE"
To fight global concerns over its gear, Huawei has launched an unprecedented media blitz by opening up its campus to journalists and parading its typically low-key founder, Ren Zhengfei, in front of media.
It has stepped up the campaign in recent months after Meng Wanzhou, Huawei CFO and Ren's daughter, was arrested in Canada in December at U.S. behest on charges of bank and wire fraud in violation of U.S. sanctions against Iran. She denies wrongdoing.
The company has said the spying concerns are unfounded.
"Spying would be equal to suicide," said Song Liuping, Huawei's chief legal officer.
"We have no intention of committing suicide."
Huawei derived 48.4 percent of its business from overseas markets in 2018, versus 49.5 percent a year earlier. The company's fastest growing region was Europe, Middle East and Africa with a growth of 24.3 percent, followed by Americas with a growth of 21.3 percent.
A top company executive said earlier this week that the U.S. campaign against Huawei was having little impact on its sales and that it was unlikely many countries would heed the U.S. call to ban its gear.
U.S. President Donald Trump said he had asked China to immediately remove all tariffs on U.S. agricultural products because trade talks were progressing well.
He also delayed plans to impose 25 percent tariffs on Chinese goods on Friday, as previously scheduled.
“I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions,” Trump said on Twitter, pointing out that he had not raised tariffs on Chinese goods to 25 per cent from 10 per cent on March 1 as planned.
“This is very important for our great farmers – and me!” Trump said.
Farmers are a key constituency for Trump’s Republican Party, and the U.S. president’s trade war with China has had a heavy impact on them. Beijing imposed tariffs last year on imports of soybeans, grain sorghum, pork and other items, slashing shipments of American farm products to China.
U.S. Agriculture Secretary Sonny Perdue said this week that U.S. trade negotiators had asked China to reduce tariffs on U.S. ethanol, but it was not immediately clear whether Beijing was willing to oblige.
Trump’s post on Twitter came several hours after the U.S. Trade Representative’s office said that it would delay the scheduled hike in tariffs on $200 billion worth of Chinese goods.
The notice, due to be published in the Federal Register next Tuesday, says it is “no longer appropriate” to raise the rates because of progress in negotiations since December 2018. The tariff would remain “at 10 percent until further notice.”
In a statement on Saturday, China said it welcomed the delay.
Speaking at a separate briefing in Beijing, a Chinese government official said both countries were working on the next steps, though he gave no details.
“China and the United States reaching a mutually-beneficial, win-win agreement as soon as possible is not only good for the two countries but is also good news for the world economy,” said Guo Weimin, spokesman for the high profile but largely ceremonial advisory body to China’s parliament.
A tariff increase to 25 percent from 10 percent was initially scheduled for Jan. 1, but after productive conversations with Chinese President Xi Jinping, the Trump administration issued a 90-day extension of that deadline.
Trump had said on Sunday he would again delay the increase because of progress in the talks.
President Donald Trump said on Friday there was "a very good chance" the United States would strike a deal with China to end their trade war and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.
U.S. and Chinese negotiators had made progress and will extend this week's round of negotiations by two days through Sunday, Trump told reporters at the White House as he met with his top negotiators and their counterpart, Chinese Vice Premier Liu He.
"I think that we both feel there's a very good chance a deal will happen," Trump said.
Liu agreed there had been "great progress".
"From China, we believe that (it) is very likely that it will happen and we hope that ultimately we'll have a deal. And the Chinese side is ready to make our utmost effort," he said at the White House.
The Republican president said he probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.
Extending the deadline would put on hold Trump's threatened tariff increase to 25 percent from 10 percent on $200 billion (153 billion pounds) of Chinese imports into the United States. That would prevent a further escalation in a trade war that already has disrupted commerce in goods worth hundreds of billions of dollars, slowed global economic growth and roiled markets.
Optimism that the two sides will find a way to end the trade war lifted stocks, especially technology shares. The S&P 500 stock index reached its highest closing level since Nov. 8. Oil prices rose to their highest since mid-November, with Brent crude reaching a high of $67.73 a barrel.
Trump and Treasury Secretary Steven Mnuchin said the two sides had reached an agreement on currency. Trump declined to provide details, but U.S. officials long have expressed concerns that China's yuan is undervalued, giving China a trade advantage and partly offsetting U.S. tariffs.
Announcement of a pact aimed at limiting yuan depreciation was putting "the currency cart before the trade horse," but would likely be positive for Asian emerging market currencies, said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
"How can you agree to avoid excessive Chinese yuan depreciation or volatility if you have not made an agreement on trade that could have huge FX implications?" Ruskin asked in a note to clients.
In a letter to Trump read aloud by an aide to Liu at the White House, Xi called on negotiators to work hard to strike a deal that benefits both country.
Trump said a deal with China may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp.
The Justice Department has accused Huawei of conspiring to violate U.S. sanctions on Iran and of stealing robotic technology from T-Mobile US Inc.
Chinese peer ZTE was last year prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.
MEMORANDUMS NO MORE
Trump appeared at odds with his top negotiator, U.S. Trade Representative Robert Lighthizer, on the preliminary terms that his team is outlining in memorandums of understanding for a deal with China. Trump said he did not like MOUs because they are short term, and he wanted a long-term deal.
"I don't like MOUs because they don't mean anything," Trump said. "Either you are going to make a deal or you're not."
Lighthizer responded testily that MOUs were binding, but that he would never use the term again.
Reuters reported exclusively on Wednesday that the two sides were drafting the language for six MOUs covering the most difficult issues in the trade talks that would require structural economic change in China.
Negotiators have struggled this week to agree on specific language within those memorandums to address tough U.S. demands, according to sources familiar with the talks. The six memorandums include cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.
An industry source briefed on the talks said both sides have narrowed differences on intellectual property rights, market access and narrowing a nearly $400 billion U.S. trade deficit with China. But bigger differences remain on changes to China's treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft of U.S. trade secrets.
Lighthizer pushed back when questioned on forced technology transfers, saying the two sides made "a lot of progress" on the issue, but did not elaborate.
The United States has said foreign firms in China are often coerced to transfer their technology to Chinese firms if they want to operate there. China denies this.
The U.S. Chamber of Commerce on Friday urged the U.S. government to ensure the deal was comprehensive and addressed core issues, rather than one based on more Chinese short-term purchases of goods.
China has pledged to increase purchases of agricultural produce, energy, semiconductors and industrial goods to reduce its trade surplus with the United States.
China committed to buying an additional 10 million tonnes of U.S. soybeans on Friday, U.S. Agriculture Secretary Sonny Perdue said on Twitter. China bought about 32 million tonnes of U.S. soybeans in 2017. The commitments are a "show of good faith by the Chinese" and "indications of more good news to come," Perdue wrote.
China was the top buyer of U.S. soybeans before the trade war, but Beijing's retaliatory tariffs on U.S. soybeans slashed business that had been worth $12 billion annually.
Oil traded near the highest level since November on optimism the U.S. and China can reach a trade deal and as an outage at the world’s largest offshore field in Saudi Arabia signaled tightening supply.
Futures in New York rose as much as 1 percent after advancing 5.4 percent last week. President Donald Trump said talks with China were “very productive” as his team returned from Beijing and readied for another round of discussions in Washington this week, raising hopes that a trade war between the world’s largest economies will ease. The Saudis, meanwhile, were said to be repairing a damaged power cable that’s curbed output at the Safaniyah field.
Crude’s surged about 24 percent this year as Saudi Arabia and Russia pledged to expand their output cuts, easing concerns that record U.S. production would result in a global glut. More supply is being threatened because of American sanctions against Venezuela and Iran. Reports that the U.S. and China had reached consensus in principle on the main topics in their negotiations further helped boost investors’ risk appetite.
“Markets are astonished by the amount of production cuts and the further reductions Saudi plans to make,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. “Even though there was no conclusive trade deal from Beijing, the already bullish oil market took no news as good news.”
West Texas Intermediate for March delivery rose as much as 54 cents to $56.13 a barrel on the New York Mercantile Exchange and traded 49 cents higher at $56.08 at 7:34 a.m. in London. Transactions will be booked Tuesday for settlement because of the U.S. President’s Day holiday. Prices last week posted their biggest gain in more than a month.
Brent for April settlement was at $66.65 a barrel, up 40 cents, on the London-based ICE Futures Europe exchange. It gained 6.7 percent last week. The global benchmark crude’s premium over WTI for the same month narrowed to $10.19, after widening to the biggest spread in more than three months on Friday.
Also Read: Trump, Xi Hail Progress in Trade Talks as Tariff Deadline Nears
Conciliatory signals from the world’s two biggest economies are calming fears Washington will ratchet up tariffs before a March 1 deadline. “Big progress being made on soooo many different fronts!,” Trump said on Twitter Sunday.
Worries about the trade war worsening a global slowdown are receding at a time when OPEC and its allies are accelerating their implementation of the oil-production cuts agreed in December. The Organization of Petroleum Exporting Countries reported a strong start to the latest round of supply reductions, with the Saudis pledging to cut beyond agreed levels.
The impact of the outage at Safaniyah, which has the capacity to pump 1.2 million to 1.5 million barrels of mostly heavy-sour crude a day, could be damped as seasonal refinery maintenance works across Asia and the U.S. typically peak around now. Saudi Arabian Oil Co. said in statement that all its facilities were “safe and normal,” without elaborating on the situation at Safaniyah.