Yellen, Xi Jinping discuss economic challenges in call

The US Treasury Secretary Janet Yellen and China's Vice Premier Liu He - China's top economic official - had a substantive conversation on a call, according to a statement by the US Treasury.

The talks, which readouts from both sides suggest that were initiated by the United States, were described as candid and came as Bloomberg and The Wall Street Journal reported that the Biden administration may lift tariffs on Chinese goods as soon as this week.

The exchange was constructive and pragmatic, according to the Chinese readout. It said that the two sides discussed views on the macroeconomic situation and the stability of the global industrial chain and supply chain. Both sides agreed that the global economy is facing serious challenges and placed great importance on better policy coordination between China and the United States, it added.

From the World Bank to Wall Street, there is a growing concern about the risk of a global recession and inflation that has not seen in decades is hammering consumers in the United States and Europe. China's economy has been battered by the country's zero-Covid policy. Analysts worry that the Chinese economy could contract in the second quarter, putting the government's annual growth target of 5.5% for 2022 out of reach. The Chinese side expressed concern over issues such as the lifting of additional tariffs and sanctions imposed by the United States on China and fair treatment of Chinese companies, according to the Chinese statement. The US readout did not mention tariffs or sanctions but stated that Yellen raised issues of concern including Russia's war against Ukraine and China's unfair, non-market economic practices. The call between the two senior economic officials comes after Bloomberg reported on Monday that Biden may announce the reversal of US tariffs on Chinese consumer goods this week. The move is seen as a way to counter inflation, according to the report, which cited unnamed sources. The Wall Street Journal said on Monday that Biden may decide on Chinese tariffs this week, but it added that the decision is constrained by competing policy aims: addressing inflation and maintaining economic pressure on Beijing. The White House did not respond to a request for comment. HSBC said the timing makes sense, as Jingyang Chen, Asian foreign exchange strategist, pointed out that US tariffs on $34 billion worth of Chinese imports took effect on July 6 of the start of the trade war with China. Since then, tensions have gone up dramatically, with the two sides imposing new tariffs on billions of dollars of each other's exports. After months of negotiations a trade truce was signed in January 2020. However, bilateral relations have remained tense under the Biden administration. There are hopes that the administration will relax some of the tariffs to help curb rising prices due to spiking inflation in the United States. Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank, said the US tariffs are about to be cut. He stated that the Biden administration has strong political motivation to ease tariffs in order to bring down inflation before the mid-term elections in November.