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China, U.S. make nice on trade

With both economies suffering, there's an incentive to prevent the trade agreement from becoming a casualty.

By Rosalind Mathieson

Soybeans, barley and meat tell a political story right now.

China is accelerating purchases of soybeans from the U.S., a move that ticks a box with Washington. Top trade negotiators from China and the U.S. spoke last week and agreed to do better on implementing the deal to end last year’s trade war.

China will also exempt further tariffs on U.S. aircraft radar as part of a list of 79 items released today.

Beijing and the U.S. are arguing over the coronavirus pandemic. But after a tense few weeks, President Donald Trump may start to soften his accusations against China about the origins of the outbreak. With both economies suffering, there’s an incentive, even briefly, to prevent the trade agreement from becoming a casualty in a broader political fight.

No such gestures for Down Under, though. China is unleashing its trade clout against Australia, irritated by Prime Minister Scott Morrison’s calls for an independent probe into the pandemic’s origins.

Beijing has suspended meat imports from four abattoirs. Australia also faces the threat of major tariffs on barley shipments to China. Those developments are weighing on the Australian dollar, because China is the country’s biggest trading partner.

It’s a classic play by Beijing that Australia has weathered before. But with the country’s economy also hit by virus lockdowns, there’s less wiggle room for Morrison. In a game of political chicken, it’s often trade that blinks first.

Global Headlines

Reluctant spender | Trump is hesitating before supporting more coronavirus stimulus as his administration gauges the impact of about $5 trillion poured into the economy so far. Yet as Josh Wingrove and Saleha Mohsin explain, he and his Republican allies may face pressure to act if efforts to reopen the economy don’t rapidly bear fruit. The White House’s leading infectious disease expert, Anthony Fauci, will appear remotely today along with two other top health officials before a Senate committee to discuss how to safely restart the economy.

Messy politics | Seven weeks after Boris Johnson put the U.K. into lockdown, with more than 30,000 dead and the economy on its knees, the united political front that defined the first phase of the British response has splintered. Kitty Donaldson, Tim Ross and Robert Hutton report on the tense Sunday afternoon call with rival party leaders that went so wrong. Johnson watered down his plan for rebooting the economy after employers and unions said many workplaces were not ready for the return to work he called for. About 7.6 million U.K. workers are exposed to a reduction in hours, being furloughed or permanent layoffs during the lockdown, McKinsey says.

Only hope | Italy needs help from the European Union if it is to cope with a debt load set to balloon to close to 160% of national output, Austrian Chancellor Sebastian Kurz told Matthias Wabl and Matthew Miller in a video interview. But while Austria backs EU support for Italy, he doesn’t think Rome’s call for the rest of the bloc to co-sign on new debt via joint borrowing “is the right answer.”

Fast approvals | Facing dissatisfaction over his efforts to contain the virus, Japanese Prime Minister Shinzo Abe is following Trump in accelerating the approval of still-unproven drugs. While new infections are declining in Japan, regulators authorized the use of Gilead Sciences’s remdesivir just three days after receiving the application. The process usually takes a year.

Homeward bound | The pandemic has reversed one of Europe’s largest migrant trends since World War II almost overnight. While a stream of doctors, engineers, construction workers and farm laborers moved west after the bloc’s expansion into the former communist sphere, Andra Timu reports how millions of them are returning home and may decide to stay there.

What to Watch

Elon Musk restarted production at Tesla’s only U.S. car plant, defying county officials who ordered the company to stay under lockdown and openly acknowledging he was risking arrest.

The impact of the coronavirus threatens to scupper Kenyan President Uhuru Kenyatta’s pledge to transform the economy through manufacturing, farming, and low-cost housing.

And finally ... Wuhan has ordered officials to test its entire population of 11 million after the Chinese city where the pandemic began reported new infections for the first time since its lockdown lifted. The ambitious plan reflects China’s anxiety over a resurgence of the virus, which it stamped out through restrictions that affected hundreds of millions of people at their peak. Wuhan was sealed off from Jan. 23 until April 8 in an ordeal that saw scores die as the health system was overwhelmed.

--With assistance from Karl Maier and Kathleen Hunter.
To contact the author of this story:
Rosalind Mathieson in London at rmathieson3@bloomberg.net
To contact the editor responsible for this story:
Michael Winfrey at mwinfrey@bloomberg.net
© 2020 Bloomberg L.P.
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