China mulls opening communication lines with US on trade

Beijing said it is assessing the possibility of trade talks with Washington, the first sign since Donald Trump hiked tariffs last month that negotiations could begin between the two sides.

China's commerce ministry said in a Friday statement that it had noted senior US officials repeatedly expressing their willingness to talk to Beijing about tariffs, and urged officials in Washington to show "sincerity" toward China. "The US has recently sent messages to China through relevant parties, hoping to start talks with China," it added. "China is currently evaluating this."

Futures on the S&P 500 Index erased early losses in Asia soon after the statement, and a gauge of regional equities rallied to its highest level in more than a month. The Hang Seng China Enterprises Index finished almost 2% higher in Hong Kong, while mainland markets were shut due to a holiday.

Shift in stalemate?

The statement signaled the stalemate between the world's two largest economies could shift, after Trump hiked US tariffs to the highest level in a century and Beijing retaliated in kind. Trump has repeatedly said President Xi Jinping needs to contact him in order to begin tariff talks. Earlier this week, treasury secretary Scott Bessent said it's up to Beijing to take the first step to de-escalate the dispute.

John Gong, a former consultant to China's commerce ministry, likened the latest gesture to "the first rain after a long drought." It suggests "there's a go-ahead from the very top of the leadership in China," according to Gong, who's now a professor at the University of International Business and Economics in Beijing.

The economic fallout from the confrontation may be giving new momentum to efforts to bring both sides to the negotiating table. The US economy contracted at the start of the year largely because of a monumental surge of imports to get ahead of the tariffs that have roiled global financial markets and caused consumer confidence to plummet.

Weakness in parameters

In China, factory activity slipped into the worst contraction since December 2023, the official manufacturing purchasing managers' index showed this week. New export orders fell to the lowest since December 2022 and recorded the biggest drop since April that year, when Shanghai entered a citywide Covid lockdown.