Washington is legally obliged under the Taiwan Relations Act of 1979 to help the self-ruled island access defensive weapons, but such transactions are bitterly opposed by Beijing, which considers Taiwan a breakaway province. A new round of weapons sales to Taipei would also risk further inflaming tensions between the U.S. and China as the two countries remain locked in a trade fight.

Multiple people familiar with the weapons-sales plan told The Wall Street Journal that members of Congress have been informally notified of the possible arms sale. Ultimately, the Taiwanese government would have the option to buy some or all of the items included in the proposal, these people said.

Reuters earlier reported the potential sale, which includes Abrams tanks, antitank missiles, medium-range tactical missiles and portable Stinger air-defense missiles. The value could be in excess of $2 billion.

A State Department official, citing U.S. government policy on potential or pending arms sales, declined to comment on or confirm the terms before formal congressional notification.

A representative of the Taiwanese government declined to comment beyond a Ministry of National Defense statement confirming its request for the weapon systems, in accordance with U.S. procedures for foreign military sales.

In Beijing, Chinese Foreign Ministry spokesman Geng Shuang said “China firmly, consistently and unequivocally opposes U.S. arms sales to Taiwan.” He said he urged Washington to recognize the sensitive nature of the matter, honor the One China policy and halt any U.S. arms sales to or military relations with Taiwan.

China and Taiwan have been governed separately since 1949, when China’s Nationalist government retreated to the island after it was ousted from the mainland by Communist Party forces.

The U.S. officially adheres to the One China policy, meaning Washington won’t establish formal diplomatic relations with Taipei, but the U.S. and Taiwan view the sales as crucial for stability in the region. President Trump approved a $1.42 billion arms sale in 2017, and the Obama administration approved a similar transfer in 2015.

With Beijing and Washington at a critical point in the high-stakes trade negotiations, new weapons sales could become a complicating factor in the dispute.

President Trump warned Beijing on Thursday about another potential tariff increase on Chinese goods if negotiators fail to reach a deal. China’s Commerce Ministry reiterated that Beijing wouldn’t shy away from responding to any U.S. escalation, though said it is not seeking a trade war.

Write to Courtney McBride at courtney.mcbride@wsj.com

Source:  https://www.morningstar.com/news/dow-jones/TDJNDN_2019060612086/us-plans-more-than-2-billion-in-weapons-sales-to-taiwan-angering-beijing.html

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KEEPING SCORE: In Europe, Germany’s DAX was up 0.5 percent to 12,456 while the CAC 40 in France was 0.4 percent higher at 5,454. British markets were closed for a summer bank holiday. Major U.S. indexes were set to open higher with Dow futures and the broader S&P 500 futures up 0.3 percent. On Friday, the S&P closed at an all-time high, with sentiment boosted by a string of solid corporate earnings.

DOVISH FED: U.S. Federal Reserve Chairman Jerome Powell sketched a positive picture of the U.S. economy on Friday and said the Fed’s incremental approach to raising rates has so far succeeded. “The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent,” Powell said, at an annual conference of central bankers in Jackson Hole, Wyoming. The chairman’s measured tone about the economy and his message that the Fed plans to stick with a gradual pace of rate hikes appeared to sit well with investors.

ANALYST TAKE: The message from Wyoming wasn’t unexpected but it does help risk assets,” said Kit Juckes, a strategist at Societe Generale.

TRADE TENSIONS: Trade issues also remain at the forefront of investors’ attention. The United States and China have imposed 25 percent tariffs on $16 billion of each other’s goods including automobiles, factory equipment and other goods. Last Thursday, U.S. and Chinese negotiators ended two days of meetings without breaking a deadlock over trade that has unnerved financial markets and disrupted global commerce. Lindsay Walters, a White House spokeswoman, said the delegations exchanged views on achieving a balanced economic relationship, without mentioning further talks. China’s Commerce Ministry said the talks were constructive and the sides would maintain contact, but didn’t give details.

ASIA’S DAY: Japan’s benchmark Nikkei 225 index added 0.9 percent to 22,799.64 and South Korea’s Kospi rose 0.3 percent to 2,299.30. Hong Kong’s Hang Seng jumped 2.2 percent to 28,271.27. The Shanghai Composite rebounded 1.9 percent to 2,780.90. Australia’s S&P/ASX 200 gained 0.3 percent to 6,268.87. Taiwan’s benchmark rose and Southeast Asian indexes were mostly higher.

ENERGY: Benchmark U.S. crude dropped 2 cents to $68.70 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, which is used to price international oils, also fell 2 cents to trade at $75.80 a barrel in London.

CURRENCIES: The euro was steady at $1.1627 while the dollar fell 0.2 percent to 111.01 yen.

Source: https://www.foxbusiness.com/markets/global-stocks-push-higher-after-feds-powell-reassures

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