US says ‘substantial progress’ after trade talks with China

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• US expresses optimism over China trade talks

• Fragile India-Pakistan ceasefire holds

• Scotch makers toast UK-India trade deal

Treasury secretary Scott Bessent yesterday said the US and China had made “substantial progress” over two days of trade talks in Geneva. The optimistic comments were the first sign that Washington and Beijing may start to ratchet down economic tensions.

What US and Chinese officials said: “We will be giving details tomorrow, but I can tell you that the talks were productive,” Bessent told reporters after he and US trade representative Jamieson Greer finished their meetings with Chinese vice-premier He Lifeng. Greer said it was “important to understand how quickly we were able to come to agreement, which reflects that perhaps the differences were not so large as maybe thought” and added that there had been a “lot of groundwork”. 

The Chinese vice-premier said the two sides had held candid and constructive talks and had agreed to create a consultative mechanism to continue trade and economic negotiations, according to Reuters.

What’s at stake: The US has placed a 145 per cent tariff on goods from China while Beijing has retaliated with its own 125 per cent levy — measures that have roiled financial markets and triggered concerns about global supply chains. Bessent said China faced economic challenges and had more incentive to come to the table. But the Trump administration became more concerned following warnings from Wall Street and after retail giants Walmart and Target told the president that store shelves would become empty. Read the full story.

Here’s what else we’re keeping tabs on today:

• Economic data: India publishes April CPI inflation figures.

• Chinese diplomacy: Brazilian President Luiz Inácio Lula da Silva is in Beijing for a state visit. Meanwhile Chinese vice-premier He Lifeng visits France, where he is scheduled to chair the China-France High Level Economic and Financial Dialogue.

• Philippines: Relations with China loom over today’s national and local midterm elections. (Reuters)

Five more top stories

1. A ceasefire agreement between India and Pakistan appeared to be holding yesterday, though each had earlier accused the other of violations and differed on what had been agreed. US President Donald Trump, who had claimed credit for the ceasefire, pledged to “increase trade, substantially, with both of these great Nations” and “work with you both” to find a solution to the Kashmir dispute. Read the full story.

2. Ukrainian President Volodymyr Zelenskyy has said that he is ready to start peace talks with Vladimir Putin in Istanbul on Thursday, after Trump told him to meet the Russian president there “immediately”. Zelenskyy’s offer came after a back-and-forth in which Ukraine called for Moscow to agree to a 30-day unconditional ceasefire starting Monday, to which Putin said the two sides should instead hold talks this week in Turkey.

3. OpenAI and Microsoft are rewriting the terms of their multibillion-dollar partnership in a negotiation designed to allow the ChatGPT maker to launch a future initial public offering, while protecting the software giant’s access to cutting-edge artificial intelligence models. Read more about the high-stakes talks.

4. Hamas said yesterday it would release an Israeli-American hostage held in Gaza as a goodwill gesture to Trump. The Palestinian militant group’s move to release Edan Alexander comes as the US president prepares to visit the Middle East this week.

5. Colombia faces possible US trade retaliation after its leftwing President Gustavo Petro said he planned to sign up to Beijing’s Belt and Road infrastructure initiative during a visit to China for a regional meeting next week. Colombia has long been one of Washington’s most important South American allies, so a move by Bogotá to join BRI would be a significant win for Beijing.

News in-depth

India and Pakistan’s skirmish last week, their most serious in decades, was also a testing ground for equipment crucial to a different rivalry: that between China and the US-led western alliance. About 81 per cent of Pakistan’s military equipment comes from China, while India has emerged as the world’s largest weapons importer. Analysts said mounting evidence that a Pakistani pilot in a Chinese-made fighter jet shot down India’s French-made aircraft “came as a pleasant surprise for China”.

We’re also reading . . . 

Chart of the day

The UK-India trade deal agreed last week will halve tariffs on Scotch whisky into the world’s biggest export market by volume for the spirit. With the loosening of trade barriers, analysts said exporters to India were now more likely to push pricier bottled Scotch “which could deliver long-term upsides”.

Take a break from the news

Go inside the control room that monitors every subway train in New York. Under pressure from the Trump administration, which has threatened to withhold federal funding for the transportation system, a dedicated band pulls the levers and pushes the buttons that keep the city moving.