US trade disputes and the prospect of even more tariffs on China is a "big headwind" to American manufacturing but the sector still expects solid growth this year, according to an industry survey released Wednesday.

The world's two leading economies face a possible make-or-break moment when top negotiators meet in Washington this week following months of fraught talks under the shadow of US plans to impose steeper tariffs on China.

While manufacturing growth projections have fallen since December, firms expect revenues to increase by four percent this year, which is "still very strong growth," according to Timothy Fiore of the Institute for Supply Management.

A semi-annual ISM survey on manufacturing shows companies "more and more are passing price increases on to customers because of tariffs," Fiore told reporters, pointing to some "really alarming" signals on trade that had showed up in ISM's earlier monthly reports.

But, having adapted to existing tariffs, the sector is now steeling itself for an even bigger hit, after Trump announced plans to more than double existing tariffs on $200 billion in Chinese goods to 25 percent starting Friday.

Fiore said the increased tariffs likely will stay in place for months creating "a big headwind coming our way." And among the goods impacted a "big part of that are intermediate goods."

However, relative to the size of the US economy the amount of tariffs "shouldn't be moving the needle that much," even though it has undercut sentiment.

Anthony Nieves, who heads the ISM survey of the services sector, said the tariffs are "impacting their economy a lot more than what we're feeling over here in the states. There's a lot of pressure on them."

In fact, China reported early Wednesday that exports fell by more than expected in April, dropping 2.7 percent even as its surplus with the United States remains large — something US negotiators are seeking to remedy in the trade talks.

Fiore said the supply chain managers "are pretty resilient" and far fewer firms now report disruption as a result of the tariffs.

US and Chinese officials are due to meet Thursday and Friday, and Trump said on Twitter earlier Wednesday that they are coming to "make a deal."

Trump says Chinese trade officials coming to US 'to make a deal'
Washington (AFP) May 8, 2019 –

Chinese trade officials intend to "make a deal" in a new round of talks in Washington this week, President Donald Trump said Wednesday, reviving hopes for negotiations that appeared to be hanging by a thread.

However, with negotiations set to resume late Thursday, there was no letup in last minute brinkmanship, and China has vowed to retaliate if Trump follows through on plans to ratchet up existing tariffs this week.

Trump has kept the pressure on Beijing, pressing ahead with plans to more than double the punitive duties on $200 billion in Chinese merchandise on Friday — a prospect that has sent shivers through the global economy since last year.

China's Commerce Ministry warned of unspecified retaliation should Trump not back down, saying the escalation was "not in the interests of the two countries' people."

"If the US tariff measures are put into effect, China will have no choice but to take the necessary countermeasures," a ministry spokesperson said on Wednesday.

US officials on Monday effectively ended a six-month trade truce, accusing Chinese negotiators of backsliding on major commitments agreed to in months of talks.

Trump suggested he was comfortable without making a deal.

"We'll see but I am very happy with over $100 Billion a year in Tariffs filling US coffers…great for US, not good for China!" he tweeted on Wednesday.

US Trade Representative Robert Lighthizer released an official notice Wednesday that duty rates on a vast array of Chinese-made electrical equipment, machinery, auto parts and furniture would jump to 25 percent after midnight (0400 GMT) on Friday.

Following Trump's first Twitter screed Sunday on tariffs, stock markets around the world sank for two trading days, but were mixed on Wednesday while Wall Street ended a volatile trading day mostly lower.

– Profound changes –

The world's top two economies have exchanged tariffs on more than $360 billion in two-way trade, gutting US soy bean exports to China and weighing on the manufacturing sectors in both countries.

But amid robust US economic growth, American officials have long believed the country is better positioned than China to withstand the pain of a trade war.

Officials with the Institute for Supply Management said Wednesday that while the tariffs create a "headwind" for the US economy, the outlook for services and manufacturing was still positive this year.

Anthony Nieves, who heads the ISM survey of the services sector, told reporters the tariffs were hitting China "a lot more than what we're feeling over here in the states. There's a lot of pressure on them."

Trump also tweeted Wednesday that Chinese officials mistakenly hoped they could hold off to negotiate with a "very weak" future Democratic president "and thereby continue to ripoff the United States… for years to come."

However, economists and even Trump's fellow Republicans in Congress, stress that US importers and consumers are the ones that pay the price for higher tariffs.

Washington has demanded far-reaching and profound changes to the Chinese economy, such as submitting state enterprises to market principles, reducing massive subsidies and ending the alleged "theft" of US technology.

Analysts say China will be reluctant to make many of these changes, which could undermine the Communist Party's political power.

Despite the trade war, the value of US imports of Chinese goods have continued to rise, widening the soaring trade deficit with the world's second largest economy.