Trump hints at China trade deal as Xi prepares response

US president will “probably” come to an agreement with China to resolve dispute that has shaken financial markets

FILE - In this April 7, 2017, file photo, U.S. President Donald Trump gestures as he and Chinese President Xi Jinping walk after their meetings at Mar-a-Lago in Palm Beach, Fla. A year after Trump tried to disarm Xi at Mar-a-Lago with smooth talk and hospitality, he's resorted to hard ball and found that Xi is willing to throw it back. But at least for now, the acrimony over trade is unlikely to spill over into sensitive national security issues.(AP Photo/Alex Brandon, File)
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President Donald Trump expressed optimism the US will be able to reach a deal with China that defuses trade tensions between the world's two biggest economies.

Mr Trump said his government would "probably" reach an agreement with China to resolve a dispute that has shaken financial markets and raised fears of a major economic conflict between the nations. The US is considering tariffs on as much as $150 billion worth of Chinese imports, while China has said it will respond with levies on everything from US soybeans to planes.

The president said on Monday it would not be "nice" of China to target American agriculture in retaliation. "Our farmers are great patriots. They understand they're doing this for the country," he said. "We'll make it up to them."

US stocks rallied on Monday as fears of a trade war subsided, and investors looked ahead to the start of the first-quarter earnings season for companies. Goldman Sachs chief economist Jan Hatzius said in a research note that the firm continues to expect the two countries to reach a compromise, and that the economic impact of the announced tariffs would not be dramatic.

Expectations are building the US and China may be able to negotiate a settlement. Treasury Secretary Steven Mnuchin has been speaking to Chinese Vice Premier Liu He about trade issues, with the US pressing for more access on autos and financial services.

But it remains unclear where the talks stand, and who is leading them on either side. In an opinion piece in the Financial Times, White House trade adviser Peter Navarro accused China of breaking "every rule in the fair trade book," and responding to the president's trade actions with a "Great Wall of denial".

The appropriate response from China would be to change its behaviour, said a White House official, adding that the government will use all available tools to protect American workers, farmers and ranchers.

Mr Trump ordered the tariffs after the US Trade Representative’s office concluded China abuses American intellectual property and forces US companies to transfer technology. The US has not said when the duties will take effect.

A former senior Chinese diplomat suggested on Monday that Beijing was not for talking. “As I understand, there is no plan whatsoever for talks,” said Ruan Zongze, now executive vice president at the Chinese Institute of International Studies. “China will fight.”

Some clarity may come on Tuesday, when President Xi Jinping will give a speech at the Boao Forum for Asia, where he is expected to lay out China’s approach to the trade dispute.

Mr Trump also said the US is close to negotiating a revision to the North American Free Trade Agreement. “We are fairly close on Nafta and if we don’t make the right deal we’ll terminate Nafta and we’ll make the right deal after that,” the president said.

The White House has pushed to announce a renegotiated Nafta at the April 13-14 Summit of the Americas in Peru, which the president will attend. But Mr Trump said last week he had told his trade negotiators not to rush talks.

Mexican economy minister Ildefonso Guajardo said on broadcaster Televisa that he sees an 80 per cent chance of an agreement by the first week of May.