Secretary Mnuchin says China trade talks must include currency issues

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HSBC said that China's export growth surprised to the upside in September, as exports to the European Union accelerated and growth of exports to the USA remained stable.

Julian Evans-Pritchard, an economist at Capital Economics, tells the Post that one reason that China has been able to beat Trump's tariffs so far is that its currency value has depreciated by more than eight percent since June, which has helped make its products even cheaper overseas, while also reducing domestic demand for USA imports.

Mr Trump lashed out as as senior White House figures accused China of trying to destabilise USA democracy and presenting the most serious threat to its security.

Export restrictions on technologically advanced products also could lead to disruptions for some U.S. tech companies with extensive involvement in China.

Overall export growth accelerated to 14.5% on the year from less than 10% in August, with even export growth to the USA picking.

China exports to the rest of the world grew 14.5 percent year on year in US Dollar (USD) terms, which is nearly double expectations.

"The way the USA has structured the tariffs encourages frontloading because firms that know they're going to hit with tariffs would rather pay 10 percent than 25 percent", he said.

"We're having discussions about a potential meeting", Mnuchin said, indicating that the two leaders could meet if the USA side felt the trade discussions were moving in a positive direction.

China's record high surplus with the United States could add to tensions in the trade relationship between the world's two largest economies. The US also accuses China of reckless military actions in the South China Sea.

"As it relates to today, there was nothing that specifically occurred today", Mnuchin said.

The IMF said that GDP could decline as much as peak 1.6 per cent in China and close to 1 per cent in the U.S. if the two countries further escalate the trade war and put all proposed and retaliatory tariffs in place. That's significantly higher than the $196 billion recorded between January and September a year ago.

Mnuchin met Thursday with Yi Gang, head of China's central bank. The Trump administration has also accused China of trying to undermine the president ahead of next month's congressional elections, something Beijing has denied. "Some of the sign posts to look for will be the important political meetings in the first quarter of next year", such as the National People's Congress. It also slashed China's growth forecast for next year to 6.2 percent from 6.4 percent. "Their economy has gone down very substantially and I have a lot more to do if I want to do it".

The International Monetary Fund this week cited the trade war as it lowered its 2019 growth forecast for China, which is set to see its slowest expansion since 1990.

With global growth cooling and USA threats of more tariff hikes, "the recent resilience of exports is unlikely to be sustained", said Evans-Pritchard.

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