President Trump said the U.S. may reach a trade deal with China “sooner than you think,” sending stock markets to the highest levels of the Wednesday trading session.
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“We have created the greatest economy in the history of our country, the greatest economy in the world,” Trump said, referring to his administration's loosening of corporate regulations and GOP-led tax cuts.
“Had my opponent won, China would right now be the No. 1 economy by far," Trump said. "Right now, China is way behind us, and they’ll never catch us if we have smart leadership. We've picked up trillions dollars, and they’ve lost trillions of dollars. And they want to make a deal very badly and it could happen sooner than you think.”
The president has imposed tariffs on billions of dollars in Chinese imports, which he says will force Beijing to negotiate a pact ending decades of trade-secret theft and giving U.S. companies greater access to the world's second-largest economy.
American businesses have repeatedly complained, however, that they're paying the import duties and their costs are rising as a result.
Negotiations between U.S. and China trade officials will resume in Washington in two weeks, Treasury Secretary Steven Mnuchin told FOX Business on Tuesday evening.
The two sides last week held deputy-level trade talks that resulted in Chinese importers buying 600,000 tons of U.S. soybeans, a boon for growers who had lost access to a lucrative market because of the trade dispute.
The more than yearlong trade war has taken a toll on both countries. The Chinese economy grew at a 6.2 percent rate in the second quarter, its slowest pace since 1992.
Without a trade deal, it will slow to a rate of 5.7 percent in 2020, according to a team of Hong Kong-based economists at Bank of America Merrill Lynch.
“With more extensive and higher U.S. tariffs activated, we expect stiffer headwinds on Chinese exports," which will likely curb capital spending further and become a catalyst for policy turnaround, they said earlier this month.
The U.S. economy has also slowed, growing at a 2.1 percent annualized rate in the second quarter, down from the 3 percent growth rate seen in the January-to-March period.
The economy is expected to slow further in the coming quarters, according to Sal Guatieri, senior economist at BMO Capital Markets. He says the U.S. economy will grow at a 1.9 percent clip in the third quarter and weaken into next year.
In the last three months of this year, he projects expansion of 1.6 percent, accelerating slightly to 1.8 percent in 2020, "with the drag from trade protectionism tempered by easier monetary policy and about $50 billion of new federal spending announced in the July budget deal."
The U.S. economy’s ability to avoid a recession, or consecutive quarters of contraction, will be key to Trump’s reelection campaign in 2020.
The sitting U.S. president is a perfect 11 for 11 in winning reelection if the economy stays out of a recession in the preceding 24 months, said Ryan Detrick of LPL. Presidents who steered the economy into a recession ahead of an election lost five of seven campaigns, he said.