Trade War Woes: US, China Can’t Even Agree on Who Reneged on Earlier Deal

The major Asia Pacific stock indexes are mostly lower in the afternoon session amid growing concerns over U.S. trade policy and the state of the global economy. Shares in mainland China and Australia, two countries feeling the most impact from the trade dispute between the United States and China were both lower.

At 06:18 GMT, Japan’s Nikkei 225 Index was trading 20373.58, down 227.61 or -1.10 percent. Hong Kong’s Hang Seng Index was at 26850.58, down 50.51 or -0.19 percent and South Korea’s KOSPI Index was trading 2065.05, up 23.31 or +1.18 percent.

China’s Shanghai Index was trading 2890.65, down 8.05 or -0.28 percent and Australia’s S&P/ASX 200 was at 6321.50, down 75.40 or -1.18 percent.

In other news, China released better-than-expected factory activity report and a white paper accusing US of reneging on trade deal.

China’s Caixin Manufacturing PMI Edges Higher

The Caixin/Markit factory Purchasing Managers’ Index for May was 50.2, slightly above expectations of 50. The PMI reading for April was 50.2. This put the index slightly above the expansion/contraction line at 50.

Last week, China’s official manufacturing PMI for May came in at 49.4, lower than the 49.9 economists had forecast. It was also lower than April’s reading of 50.1. The official non-manufacturing PMI for May was 54.3, unchanged from April.

Traders showed a muted response to the report.

China White Paper Accuses the U.S. of “Backtracking” on Trade Deal

In a much-anticipated white paper released on Sunday, China said the global trade problems were initiated by the United States, contrary to original reports in major media outlets. The document went on to further say the United States has been unreliable during talks and it claims that China wants mutually beneficial talks.

On May 7, U.S. trade representative Robert Lighthizer accused China of backtracking on commitments in trade talks, but insisted a deal on tariffs is still possible. He also said President Trump’s threat to impose new taxes on Chinese exports came after China reneged on promises.

At the time the trade talks eroded, U.S. Treasury Secretary Steven Mnuchin told reporters that the negotiations were 90% complete but that Chinese negotiators were trying to “go back on language that had been previously negotiated”.

Investors read the news as bearish since it indicated just how far apart the two parties are in reaching a trade deal. The big worry is if the two economic powerhouses cannot even agree on who reneged on the earlier deal then how can they move forward to settle the trade impasse.