Kudlow says U.S. expects China to start purchasing crops very soon

FILE PHOTO: White House chief economic advisor Larry Kudlow speaks with reporters on the driveway outside the West Wing of the White House in Washington, U.S. June 27, 2019. REUTERS/Yuri Gripas

WASHINGTON (Reuters) – White House economic adviser Larry Kudlow said on Thursday the United States expects China to start purchasing crops and U.S. agricultural products soon and noted that trade talks between the two countries are ongoing.

The United States and China agreed last month to restart trade talks that stalled in May. President Donald Trump agreed not to impose new tariffs and U.S. officials said China agreed to make agricultural purchases, but those have not yet materialized.

(Reporting by Jeff Mason; Editing by Chizu Nomiyama)

U.S., China to relaunch talks with little changed since deal fell apart

By David Lawder and Chris Prentice

WASHINGTON/NEW YORK (Reuters) – The United States and China are set to relaunch trade talks this week after a two-month hiatus, but a year after their trade war began there is little sign their differences have narrowed.

After meeting with Chinese President Xi Jinping in Japan just in late June, U.S. President Donald Trump agreed to suspend a new round of tariffs on $300 billion worth of imported Chinese consumer goods while the two sides resumed negotiations.

Trump said then that China would restart large purchases of U.S. agricultural commodities, and the United States would ease some export restrictions on Chinese telecom equipment giant Huawei Technologies.

But sources familiar with the talks and China trade watchers in Washington say the summit did little to clear the path for top negotiators to resolve an impasse that caused trade deal talks to break down in early May.

A U.S. official said last week the discussions were expected to resume with a phone call between U.S. Trade Representative Robert Lighthizer, Chinese Vice Premier Liu He and Treasury Secretary Steven Mnuchin.

A USTR spokesman said the call was expected this week, but gave no further details.

The United States is demanding that China make sweeping policy changes to better protect American intellectual property, end the forced transfer and theft of trade secrets and curb massive state industrial subsidies. At stake, U.S. officials say, is dominance of the high-tech industries of the future, from artificial intelligence to aerospace.

“We’ve had a change in atmospherics,” said Derek Scissors, a China expert at the American Enterprise Institute, a business-oriented Washington think tank. “While this is great for markets, the administration has not said one specific thing about how we’re unstuck.”

Scissors, who has at times consulted with Trump administration officials, said that both sides got what they wanted out of the summit — a lowering of the temperature and the avoidance of new tariffs that would have been painful for both sides.

“The pressure for one side to give into the other is diffused right now. I expect this to drag out for months,” Scissors added.

NO FIRM COMMITMENTS

Washington and Beijing appear to have different ideas of what the two leaders agreed in Osaka.

Three sources familiar with the state of negotiations say that the Chinese side did not make firm commitments to immediately purchase agricultural commodities.

One of the sources said Trump raised the issue of agricultural purchases twice during the meeting, but Xi only agreed to consider purchases in the context of a broader final agreement.

Other than a small purchase of American rice by a private Chinese firm, no purchases have materialized. Chinese officials and state media accounts in the past week have emphasized that any deal, including agricultural purchases, is dependent on removal of U.S. tariffs.

“The Chinese have been clear they didn’t promise anything,” said one source familiar with the talks.

“The idea they would give up their main leverage before getting anything doesn’t make sense. I could see them buying some pork and buying some soybeans, but it’s still going to be pennies.”

Trump administration officials have also downplayed the extent of pledges to allow Huawei to purchase U.S. technology products, with White House trade adviser Peter Navarro saying that only “lower-tech” U.S. semiconductors could be made available for sale to the company..

Reuters reported last week that the Commerce Department’s export control enforcement staff was told to continue to treat Huawei as a blacklisted entity as the department considers requests for licenses to U.S. firms to sell products and services to Huawei

Chinese officials point out that they only got the United States to concede on Huawei at the Osaka talks, rather than on their other demand, which was removing the existing tariffs.

So the focus on the upcoming talks will be the scrapping on the tariffs, they say.

A second source said that U.S. tariffs on $250 billion worth of Chinese goods and Chinese tariffs on $160 billion worth of U.S. goods could wind up being “the new normal.”

One Chinese official familiar with the situation said that trade talks would be re-started very quickly, but that there was a “fairly large gap” in the core demands of both countries and it would be a challenge to reach consensus on the toughest issues.

“The negotiating environment is even more severe,” the official said.

Another official said China remained concerned about the presence of hawks in the U.S. team, such as Trump advisor Peter Navarro.

“There are bullies there,” the official said.

The officials spoke to Reuters on condition of anonymity.

China’s foreign ministry cited Xi as telling Trump at Osaka that “on issues concerning China’s sovereignty and dignity, China must safeguard its core interests”.

A senior Beijing-based Asia diplomat said there would be pressure on China’s leadership not to give in to the United States and for any outcomes to seen as equal and balanced.

“A trade deal cannot be portrayed as a victory for the United States,” the diplomat said, citing conversations with Chinese officials.

WHICH TEXT?

There has been no indication the two sides will resume negotiations using a text that had been largely agreed before China backtracked on commitments in early May, prompting Trump to proceed with a long-threatened tariff hike to 25 percent on a $200 billion list of Chinese imports.

Beijing had cut out of that text commitments to make changes to its laws reflecting reform pledges, arguing that this would violate its national sovereignty.

Lighthizer has insisted on legal changes to make it more likely that Chinese reform pledges will be carried out.

Finding a way around this issue is paramount for talks. Beyond that, there are many other difficult issues to resolve, including the structure of an enforcement mechanism designed to hold the two sides to their pledges.

U.S. demands for curbs to provincial and local subsidies for Chinese state companies, access to China’s cloud computing market, agricultural biotech approvals and the ultimate size of China’s purchases of agricultural products are all divisive issues for the two sides.

Claire Reade, a former China trade negotiator at USTR who is now a Washington-based trade lawyer with the firm Arnold and Porter, said there was room on both sides to get a deal.

“It’s a question of political will and there are ways to maneuver around the current red flags that have been put in the ground,” Reade said. “Both President Xi and President Trump have to come out of this saying they stood strong, and they in-effect got a win.”

One way for China to avoid the appearance of giving in to U.S. demands is to take some legal steps on key issues before the deal is agreed. That way they can say they’re doing it on their own terms, she added.

(Additional reporting by Ben Blanchard in Beijing and Andrea Shalal in Washington; Editing by Simon Webb and Alistair Bell)

Trump officials say U.S.-China trade talks to resume next week

Workers load goods for export onto a crane at a port in Lianyungang, Jiangsu province, China June 7, 2019. Picture taken June 7, 2019. REUTERS/Stringer

By Jeff Mason

WASHINGTON (Reuters) – Top representatives of the United States and China are organizing a resumption of talks for next week to try to resolve a year-long trade war between the world’s two largest economies, Trump administration officials said on Wednesday.

“Those talks will continue in earnest this coming week,” White House Economic Adviser Larry Kudlow told reporters in a briefing.

An official from the Office of the U.S. Trade Representative said later that the two sides were in the process of scheduling a principal-level phone call with Chinese officials for next week.

The principal negotiators on the U.S. side are U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, while China’s top negotiator is Vice Premier Liu He.

The two sides have been in communication by telephone since last weekend, when U.S. President Donald Trump and Chinese President Xi Jinping agreed to relaunch talks that had stalled in May.

Kudlow was unclear about the timeline for relaunching face-to-face talks, saying that these would begin “soon” and that an announcement would be forthcoming.

“I don’t know precisely when. They’re on the phone. They’re going to be on the phone this coming week and they’ll be scheduling face-to-face meetings,” he said.

Talks between the two sides broke down in May after U.S. officials accused China of pulling back from commitments it had made previously in the text of an agreement that negotiators said was nearly finished.

The United States accuses China of allowing intellectual property theft and forcing U.S. companies to share their technology with Chinese counterparts in order to do business in China. It wants China to change its laws on those and other issues.

China denies such practices and is reluctant to make sweeping legal changes.

Both countries have levied tariffs on the other, but Trump made two major concessions at the meeting with Xi to get talks started again: he agreed not to put tariffs on some $300 billion in additional Chinese imports and to loosen restrictions on Chinese technology company Huawei.

China welcomed the U.S. decision not to put new tariffs on Chinese goods, commerce ministry spokesman Gao Feng told a regular media briefing on Thursday, but added the removal of existing U.S. tariffs was essential for a trade deal.

“The U.S. move to unilaterally increase tariffs on Chinese imports started the Sino-U.S. economic and trade frictions. If both sides could reach a deal, those tariffs must be completely removed,” said Gao.

The United States has 25% tariffs on $250 billion of Chinese goods now ranging from semi-conductors to furniture.

“We’ve been accommodative. We will not lift tariffs during the talks,” Kudlow said. “We are hoping that China will toe its end of it by purchasing a good many of American imports.”

Gao said China hoped the United States would follow through on Trump’s promise to ease restrictions on telecommunications giant Huawei.

Trump surprised markets on Saturday with an announcement that U.S. companies would be allowed to sell products to Huawei, which was placed on a so-called Entity List in May over national security concerns.

But industry and government officials are uncertain what the new policy will be.

The U.S. Commerce Department is reviewing license requests from U.S. companies seeking to export products to Huawei “under the highest national security scrutiny”.

(Reporting by Jeff Mason and David Lawder in Washington; Additional reporting by Stella Qiu; Editing by James Dalgleish and Lisa Shumaker)

Trump prepares for ‘productive’ talks with Xi on trade war

Japan's Prime Minister Shinzo Abe is flanked by U.S. President Donald Trump and China's President Xi Jinping during a meeting at the G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kevin Lamarque

By Roberta Rampton

OSAKA (Reuters) – U.S. President Donald Trump on Friday said he hoped for productive talks with Chinese President Xi Jinping on a trade war that is casting a shadow on global growth, but said he had not made any promises about a reprieve from escalating tariffs.

The trade feud and signs of a global slowdown have loomed over a two-day Group of 20 (G20) summit in the Japanese city of Osaka, where Trump and Xi met in passing and prepared for one-on-one talks on Saturday.

To lay the groundwork, Chinese Vice Premier Liu He met Trump’s treasury secretary, Steven Mnuchin, and Trade Representative Robert Lighthizer at the hotel where the U.S. delegation was staying, a source familiar with the talks said.

Expectations have dimmed that the world’s two biggest economies can ease tension when Trump and Xi meet.

“At a minimum it will be productive. We’ll see what happens and what comes out of it,” Trump told reporters after a series of meetings with leaders where he made clear that his priority was two-way trade deals to boost the U.S. economy.

Asked, however, if he had promised Xi a six-month reprieve on imposing new tariffs on a $300 billion list of Chinese imports, Trump said: “No.”

Trump has already imposed tariffs on $250 billion of Chinese imports and is threatening to extend those to another $300 billion of goods, effectively everything China exports to the United States. China has retaliated with tariffs on U.S. imports.

Asian shares stumbled and gold slipped on Friday, as doubts grew that the highly anticipated meeting between the two leaders would bring progress.

In Beijing, foreign ministry spokesman Geng Shuang said he hoped the U.S. side could meet China halfway.

“This accords with the interests of both countries and is what the international community is hoping for,” he told a news briefing.

China has consistently pushed back against criticism from Western countries, especially the United States and European Union, about things like intellectual property rights and the difficulty of doing business in China.

“China’s promise to expand its opening up is not just a cheque that can’t be cashed,” Xi told German Chancellor Angela Merkel at a side meeting in Osaka.

THREAT TO GLOBAL GROWTH

Trump’s administration also has trade feuds with India, Japan and Germany, whose leaders he met on Friday.

Trump said he saw U.S. trade prospects improving, days after criticizing the U.S.-Japan security treaty and demanding that India withdraw retaliatory tariffs.

“I think we’re going to have some very big things to announce. Very big trade deal,” Trump said before he began talks with Indian Prime Minister Narendra Modi. He gave no details.

A White House official said the two leaders had called on their teams to work on mutually beneficial trade solutions.

Trump also made a push to discuss U.S. concerns about Chinese telecoms equipment maker Huawei.

The United States has pressed its allies to shun Huawei in their fifth generation, or 5G, networks on security grounds, and it has also suggested it could be a factor in a trade deal with Xi.

“We actually sell Huawei many of its parts,” Trump said at his meeting with Modi. “So we’re going to be discussing that and also how India fits in. And we’ll be discussing Huawei.”

Several leaders warned that the growing Sino-U.S. trade friction was threatening global growth.

“The trade relations between China and the United States are difficult, they are contributing to the slowdown of the global economy,” European Commission President Jean-Claude Juncker told a news conference.

Xi also warned about the protectionist steps he said some developed countries were taking.

“All this is destroying the global trade order … This also impacts common interests of our countries, overshadows peace and stability worldwide,” Xi told a gathering of leaders of the BRICS grouping on the sidelines of the G20.

Japanese Prime Minister Shinzo Abe, other leaders and delegates attend a family photo session at G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kim Kyung-Hoon/Pool

Japanese Prime Minister Shinzo Abe, other leaders and delegates attend a family photo session at G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kim Kyung-Hoon/Pool

REFORMING WORLD TRADE RULES

Modi, at the same meeting, called for a focus on reforming the World Trade Organization (WTO) and Russian President Vladimir Putin decried what he called efforts to destroy the Geneva-based body.

“We consider counter-productive any attempts to destroy WTO or to lower its role,” Putin said.

The situation of the global economy was worrying, as trade felt the effect of “protectionism (and) politically motivated restrictions”, he added.

Russian Economy Minister Maxim Oreshkin said there was no agreement on how to reform the WTO system, whose rules Washington believes are outdated, though a Japanese official said G20 members agreed on the importance of reform.

The G20 leaders were also struggling to find common ground on issues such as information security, climate change and migration, said Svetlana Lukash, a Russian official helping to coordinate the meetings.

A White House official took a more positive view, saying there was a “good sense of unity in the room” between most leaders on working together on economic issues.

“China was less positive in its outlook which was in stark contrast to basically everybody else,” said the official, who spoke on condition of anonymity.

Trump, who often castigates trading partners on Twitter and at raucous political rallies, put a positive spin on trade developments.

“I appreciate the fact that you’re sending many automobile companies into Michigan and Ohio and Pennsylvania and North Carolina,” Trump told Japanese Prime Minister Shinzo Abe, who had presented him with a map showing the locations of Japanese auto investments in the United States.

Abe urged G20 leaders to send a strong message in support of free and fair trade, warning that trade and geopolitical tensions were rising and downside risks to the global economy prevailed. He also said he wanted to see momentum toward WTO reform.

Japanese and U.S. officials will meet next month to accelerate progress toward a trade deal, Economy Minister Toshimitsu Motegi told reporters after meeting Lighthizer, but added that they did not discuss a target date.

(Additional reporting by Leika Kihara, Kiyoshi Takenaka and Katya Golubkova; Additional reporting by Ben Blanchard in BEIJING; Writing by Linda Sieg in Tokyo; Editing by Clarence Fernandez, Robert Birsel and Nick Macfie)

Mexico says it will finish National Guard roll-out to stem migration this week

FILE PHOTO - Mexico's Foreign Minister Marcelo Ebrard speaks during a session with senators and lawmakers at the Senate building in Mexico City, Mexico June 14, 2019. REUTERS/Carlos Jasso

MEXICO CITY (Reuters) – Mexico will complete deployment of National Guard forces on its southern border with Guatemala this week as part of a new immigration control plan agreed with Washington, Foreign Minister Marcelo Ebrard’said on Monday.

“The deployment of the National Guard ordered, with support from the Ministry of Defense and the Navy, will be completed this week,” Ebrard said at a news conference.

Mexico is stepping up efforts to cut the flow of mostly Central American migrants toward the U.S. border under pressure from U.S. President Donald Trump, who vowed to hit Mexican goods with tariffs if it did not increase immigration control efforts.

Mexico made a deal on June 7 with the United States to avert the tariffs, setting the clock ticking on a 45-day period for the Mexican government to make palpable progress in reducing the numbers of people trying to cross the U.S. border illegally.

Mexico has pledged to send 6,000 National Guard members along its border with Guatemala under the deal.

That deployment has been patchy so far. A Reuters reporter near the border this weekend saw a handful of officials wearing National Guard insignia and spoke to other security personnel who said they were part of the guard.

There has been a jump in apprehensions at the U.S.-Mexico border this year, angering Trump, who has made reducing illegal immigration one of his signature policy pledges as he heads into his campaign to win a second four-year term in November 2020.

Most of those caught attempting to enter the United States are people fleeing poverty and violence in the troubled Central American nations of Guatemala, Honduras and El Salvador.

(Reporting by Hugh Bronstein; Editing by Dave Graham and Bill Trott)

Trump says he has a ‘feeling’ that U.S., China can strike trade deal

FILE PHOTO: U.S. President Donald Trump speaks at a fundraiser in Des Moines, Iowa, June 11, 2019. REUTERS/Kevin Lamarque

WASHINGTON (Reuters) – U.S. President Donald Trump said on Wednesday he had a “feeling” that a U.S.-China trade deal could be reached but again threatened to increase tariffs on Chinese goods if no agreement is reached.

Speaking to reporters at the White House, Trump also reiterated his intention to meet with Chinese President Xi Jinping but gave no further details.

“I have a feeling that we’re going to make a deal with China,” Trump said.

Trump and administration officials have been eyeing a possible meeting between the two leaders at the upcoming G20 summit in Japan, but Beijing has not confirmed any planned talks.

Trade talks between the world’s two largest economies fell apart in May.

(Reporting by Steve Holland; Writing by Susan Heavey; Editing by Chizu Nomiyama and Jeffrey Benkoe)

Mexico says presidential plane sale to help fund migration plan

Mexico's President Andres Manuel Lopez Obrador attends a news conference at the National Palace in Mexico City, Mexico June 10, 2019. REUTERS/Gustavo Graf

MEXICO CITY (Reuters) – Mexican President Andres Manuel Lopez Obrador said on Wednesday the sale of the former presidential jet and other aircraft from the last government would help fund efforts to curb migration under a deal struck last week with Washington.

The agreement reached on Friday averted escalating import tariffs of 5% on Mexican goods, which U.S. President Donald Trump had vowed to impose unless Mexico did more to contain migration via Central America to the United States.

In return, Mexico has agreed to toughen up its migration controls, including deploying its National Guard security force to its southern border with Guatemala.

“About how much this plan is going to cost, let me say, we have the budget,” Lopez Obrador said at his regular daily news conference. “It would come out of what we’re going to receive from the sale of the luxurious presidential plane.”

Lopez Obrador said the price tag of the Boeing 787 Dreamliner used by his predecessor Enrique Pena Nieto would start at $150 million, citing a United Nations evaluation. The plane has been on sale for several months.

As soon as he took office in December, the leftist announced plans to sell the plane, whose spacious interior includes a bedroom and is emblazoned with official government seals on the walls and flat-screen monitors.

The jet was acquired in late 2012 for $218 million. It is on sale along with 60 government planes and 70 helicopters.

Lopez Obrador has shunned the often luxurious trappings of Mexico’s wealthy elites, choosing to fly coach.

He has also rolled out a string of welfare programs for the poor and the elderly, cut salaries for top civil servants and says he is saving public money by eliminating corruption.

(Reporting by Daina Beth Solomon, editing by Hugh Bronstein and Susan Thomas)

Mexico Immigration deal reached, Trump says must be approved or tariffs

Central American migrants cross the Suchiate river on a raft from Tecun Uman, in Guatemala, to Ciudad Hidalgo, as seen from Ciudad Hidalgo, Mexico, June 10, 2019. REUTERS/Jose Cabezas

By Makini Brice

WASHINGTON (Reuters) – President Donald Trump on Monday hinted more details were to come about a migration pact the United States signed with Mexico last week, saying another portion of the deal with Mexico would need to be ratified by Mexican lawmakers.

He did not provide details but threatened tariffs if Mexico’s Congress did not approve the plan.

“We have fully signed and documented another very important part of the Immigration and Security deal with Mexico, one that the U.S. has been asking about getting for many years. It will be revealed in the not too distant future and will need a vote by Mexico’s legislative body,” Trump tweeted.

“We do not anticipate a problem with the vote but, if for any reason the approval is not forthcoming, tariffs will be reinstated.”

Last month, Trump threatened 5% tariffs on Mexican goods to be imposed on Monday. The duties would have increased every month until they reached 25% in October, unless Mexico stopped illegal immigration across its border with Mexico.

On Friday, the tariffs were called off, after the United States and Mexico announced an agreement on immigration. The joint communique issued by the two countries provided few details.

Critics have said there have been no new major commitments to slow the migration of Central Americans to the United States.

FILE PHOTO: Trucks cross the borderline into the U.S. and into Mexico at the World Trade Bridge, as seen from Laredo, Texas U.S., June 3, 2019. REUTERS/Carlos Jasso

FILE PHOTO: Trucks cross the borderline into the U.S. and into Mexico at the World Trade Bridge, as seen from Laredo, Texas U.S., June 3, 2019. REUTERS/Carlos Jasso

The agreement would expedite a program known as the Migration Protection Protocols, which sends people seeking asylum in the United States to wait in Mexico as their cases are processed.

That program, announced in December, would be expanded across the entire U.S.-Mexico border under the terms of the agreement, according to the State Department.

The deal would also send the Mexican National Guard police force to its own southern border, where many Central Americans enter Mexico.

“We’re very pleased with this agreement. It has an enforcement mechanism. It has an enforcement feature to it because these tariffs can go on at any time,” White House adviser Kellyanne Conway said in an interview with Fox News Channel.

Mexican Foreign Minister Marcelo Ebrard wrote in a tweet on Monday morning that he would brief the Mexican President Andres Manuel Lopez Obrador on the details of the agreement.

Ebrard said Lopez Obrador would discuss the deal during his morning news conference.

Marta Barcena Coqui, the Mexican ambassador to the United States, said in an interview with CBS’ “Face the Nation” on Sunday that Mexican officials had agreed to take steps to reduce illegal immigration “to previous levels that we had maybe last year or in 2018.”

During the talks last week, Mexican sources said officials were resisting safe third country status, which would mean migrants seeking asylum would have to make such a request in the first safe country they crossed.

Under such safe third country status, that country for many Central American migrants fleeing poverty, violence and corruption in their native countries would be Mexico.

Such a change would require legal changes that would take at least 90 days and would need to be ratified by Mexico’s Congress.

(Reporting by Makini Brice; Additional reporting by Doina Chiacu in Washington and Frank Jack Daniel in Mexico City; Editing by Larry King and Chizu Nomiyama)

Mexico freezes bank accounts in widening migration clampdown

Border patrol agents apprehend people who illegally crossed the border from Mexico into the U.S. in the Rio Grande Valley sector, near Falfurrias, Texas, U.S., April 4, 2018. REUTERS/Loren Elliott

MEXICO CITY (Reuters) – The Mexican Finance Ministry said on Thursday it blocked the bank accounts of 26 people for their alleged involvement in human trafficking, as Mexico broadens its migration clampdown amid growing pressure from U.S. President Donald Trump.

The ministry’s Financial Intelligence Unit (FIU) said in a statement it froze the accounts due to “probable links with human trafficking and illegal aid to migrant caravans.”

The FIU added that it would present the cases to the Attorney General’s office.

Last week, Trump said the Mexican government must take a harder line on migrants or face 5% tariffs on all its exports to the United States from June 10, rising to as much as 25% later this year.

(Reporting by Anthony Esposito; Editing by David Alire Garcia)

U.S. holds out for more from Mexico in talks over tariffs, border

By Roberta Rampton

WASHINGTON (Reuters) – Mexican and U.S. officials are set to resume talks on trade and migration on Thursday, with the United States resisting calls from its southern neighbor, businesses and some Republican lawmakers to ease up on a plan to impose import tariffs on Mexico.

Vice President Mike Pence, who led an initial round of negotiations in Washington on Wednesday, said talks were positive but emphasized the Trump administration still wants Mexico to commit to working harder to combat illegal immigration.

“We welcomed the efforts of the Mexican officials to offer solutions to the crisis at our southern border, but we need Mexico to do more,” Pence said on Thursday.

He was echoing President Donald Trump, who said on Wednesday that “not nearly enough” progress was made in the first round of talks, and warned that the tariffs would go into effect on Monday if Mexico cannot help stem the flow of mostly Central American migrants heading for the U.S. border.

Last week, Trump said Mexico must take a harder line on migrants or face 5% tariffs on all its exports to the United States from June 10, rising to as much as 25% later this year.

The unexpected announcement rattled global financial markets and even Trump’s fellow Republicans fretted about the potential economic impact on U.S. businesses and consumers who would have to absorb the costs.

MEXICO ECONOMY

Mexico would also take an economic hit that analysts warn could spark a recession. Credit ratings agency Fitch downgraded Mexico’s sovereign debt rating on Wednesday, citing trade tensions among other risks, while Moody’s lowered its outlook to negative.

Staff-level meetings are scheduled to begin at 2 p.m. (1800 GMT) on Thursday with Mexican officials at the White House, a White House official said. Mexican Foreign Minister Marcelo Ebrard earlier had meetings at the U.S. State Department.

The immigration issue came into sharper focus on Wednesday with news that U.S. border officers said they apprehended more than 132,000 people crossing from Mexico in May, the highest monthly total in more than a decade and reaching what officials said were “crisis” levels.

German bond yields fell to new lows on Thursday and U.S. treasury yields resumed their fall as trade tensions doused a rally fueled by hopes for more central bank stimulus ahead of a European Central Bank meeting. [US/]

Sentiment had soured on a lack of progress in talks between U.S. and Mexican officials, and Trump issuing a fresh threat to hit China with tariffs on at least another $300 billion worth of goods.

With Trump on a trip to Europe until Friday night, a quick agreement in the U.S.-Mexico talks is not anticipated by the U.S. side, although Mexican President Andres Manuel Lopez Obrador struck a positive note.

“The U.S. authorities have behaved very well, (including) President Trump, because they haven’t closed themselves off to dialogue and we hope that a deal is reached today,” he told a news conference on Thursday.

Nevertheless, Mexican officials have prepared a list of U.S. products that may face retaliatory tariffs if talks do not end in agreement.

The tariffs would target U.S. products from agricultural and industrial states regarded as Trump’s electoral base, a tactic China has also used with an eye toward the Republican’s re-election bid in the 2020 U.S. presidential election.

Mexico ramped up efforts to halt the flow of Central American migrants crossing the border to the United States on Wednesday, with Mexican soldiers, armed police and immigration officials blocking migrants along its own southern border with Guatemala.

It was unclear whether the hardening of Mexico’s response would appease Trump, who is struggling to make good on his key 2016 presidential campaign promise to build a wall along the U.S.-Mexico border as part of a hard-line immigration stance.

Senator Chuck Grassley, Republican chairman of the finance committee, had expressed hope on Wednesday of a quick deal with Mexico but he was more cautious on Thursday.

“The fact that there wasn’t any agreement probably isn’t surprising as long as they are going to be here two or three days,” said Grassley, one of several Republican lawmakers who have expressed concern about imposing tariffs on Mexico.

(Reporting by Roberta Rampton in Washington; Additional reporting by Alexandra Alper, Susan Cornwell and Lesley Wroughton in Washington and Anthony Esposito and Diego Ore in Mexico City; Writing by Alistair Bell; Editing by Bernadette Baum and James Dalgleish)