May 8, 2019 / 1:23 PM / in 3 months

UPDATE 2-Trump says he would be happy to keep tariffs on Chinese imports

(Adds details on trade dispute, market reaction, China expert)

By Makini Brice and David Lawder

WASHINGTON, May 8 (Reuters) - U.S. President Donald Trump said on Wednesday he would be happy to keep tariffs on Chinese imports in place, adding that China was mistaken if it hoped to delay a trade deal with the United States until a Democrat controlled the White House.

Trump made the comments after Reuters reported that China had backtracked late on Friday on almost all aspects of a draft trade agreement between the two countries, in a move that threatened to blow up months of negotiations.

The United States will increase tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent at 12:01 a.m. EDT (0401 GMT) on Friday, according to a notice posted on the Federal Register, the U.S. government’s official journal.

Trump announced the increase in a Twitter message on Sunday.

The tariff increase, if implemented, would come in the middle of two days of talks in Washington between U.S. and Chinese officials. China is sending Vice Premier Liu He, its lead negotiator for the U.S.-China trade dispute, to the talks.

“The reason for the China pullback & attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to ‘negotiate’ with Joe Biden or one of the very weak Democrats,” Trump, a Republican, tweeted on Wednesday morning.

“Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers,” he added.

‘AMERICA FIRST’

The United States and China have waged a 10-month trade war marked by tit-for-tat tariffs on hundreds of billions of dollars of each others’ goods, roiling financial markets, disrupting supply chains and crimping global economic growth prospects.

The United States is demanding Beijing make sweeping changes to its trade and regulatory practices, including protecting U.S. intellectual property from theft and forced transfers to Chinese firms, curbs on Chinese government subsidies and increased American access to China’s markets.

Trump, who has largely embraced a protectionist trade policy as part of his “America First” agenda, also has sought massive hikes in Chinese purchases of U.S. farm, energy and manufactured products to shrink a gaping U.S. trade deficit with China.

But sources familiar with the talks said China’s latest demands for changes to a 150-page document that had been drafted over several months would make it hard to avoid the U.S. tariff hike on Friday. That increase would affect Chinese imports from computer modems and routers to vacuum cleaners, furniture, lighting and building materials.

Major stock indexes rebounded on Wednesday from sharp losses earlier this week and safe-haven bond prices fell after White House spokeswoman Sarah Sanders told reporters the United States had received an “indication” that China wanted to make a deal.

Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington, said the talks were at a delicate stage and much depended on what sort of proposal Liu is bringing to Washington.

“I think the Trump administration is quite serious about imposing tariffs,” Kennedy said. “I don’t think Liu He would have agreed to come if he was just going to give the U.S. a lecture.” (Reporting by Makini Brice and David Lawder; Editing by Chizu Nomiyama and Paul Simao)

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