Trump backpedals on China threats as trade deal shows signs of slipping away

WASHINGTON - President Donald Trump on Tuesday said a new trade deal with China might not come until after the 2020 Election, a significant departure after more than a year of trying to exert pressure on one of the world's largest economies.

In a series of tweets, Trump accused China of delaying negotiations, which began in earnest last December. Even as Trump's chief trade advisers resumed talks in Shanghai, the president's tweets suggested a deal may be much more out of reach than it had seemed in recent months.

"My team is negotiating with them now, but the always change the deal in the end to their benefit," Trump tweeted. "They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe."

"The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now . . . or no deal at all."

The Dow Jones industrial average futures fell 100 points after Trump's tweets, suggesting a loss of more than 90 points at open. The Standard & Poor's 500 and Nasdaq futures also fell.

He first flagged the possibility of trade talks dragging beyond the 2020 Elections on Friday, but his decision to repeat the claim on Tuesday seemed more formal and rattled investors.

This is at least the second big part of Trump's economic agenda that he has signaled likely won't be accomplished in his first term. He has recently told advisers that he won't be able to focus on spending cuts until after his reelection, and cutting the budget was one of his core campaign promises.

What began with tariffs on steel last summer has metastasized into a massive trade conflict that has stalled two of the most powerful engines in the global economy. In tweets, Trump crowed about the China's economic slowdown, claiming the nation had lost millions of jobs because of his tariffs.

"China is doing very badly, worst year in 27," Trump tweeted. "China has lost 5 million jobs and two million manufacturing jobs due to Trump tariffs. Trumps got China back on its heels, and the United States is doing great."

Although Trump maintains the drawn-out conflict is mostly hurting China, experts say the trade war is damaging the U.S. economy and possibly fueling a global slowdown. Federal Reserve Chair Jerome Powell has pointed to headwinds from the trade war as a primary reason the central bank could cut interest rates by the time its two-day meeting ends Wednesday.

In January, the World Economic Forum predicted the trade war could reduce global gross domestic product by 0.7 percentage points to 2.8% in 2019. And in a recent research note, Morgan Stanley's chief economist warned that the trade war could spur a global recession within a year.

Trump and Chinese leader Xi Jinping met in Argentina last year and agreed to negotiate a broad trade deal. Trump set a 90-day timeline for the talks, but he kept delaying the deadlines while he felt the negotiations were going well. Then, a few months ago, Trump abruptly announced he would be imposing steep tariffs on Chinese goods because he alleged the Chinese had backtracked on some of their commitments.

And he threatened to impose even more tariffs if the Chinese did not agree to changes.

At another global summit in Japan last month, Trump met with Xi again. Trump said the talks went extremely well and postponed the imposition of any new tariffs. He also insisted that China had agreed to purchase large amount of U.S. farm products and that he would be providing a "list" for the Chinese to purchase. But those purchases, in large volumes, never took place.

Trump wrote Tuesday that China "was supposed to start buying our agricultural product now - no signs they are doing so. That is the problem with China, they just don't come through."

The White House never provided any written commitment from China that it would be purchasing new farm products, though. Trump made it sound as though it was a hand-shake agreement.

Chinese officials appear to be under less pressure to cut a deal than they were a few months ago. They also have sent signals that Trump's repeated threats are not working.

Hu Xijin, editor-in-chief of the Global Times, a state-sponsored news organization in China, responded to Trump's threats Tuesday morning with the suggestion that Trump has misread China all along.

"Whenever it's time to negotiate, the US side comes up with the trick of piling pressure. Really not a good habit," he wrote. "Americans need to change their negotiating style, show more sincerity, not just wield stick. The past one and half years have proved big stick is useless to China."

By flagging the possibility that a deal might not occur until after the 2020 Election, or perhaps even not at all, businesses and investors will need to begin contemplating what would happen if a Democrat defeats Trump next year, particularly as it pertains to U.S.-China relations.