Trump heads for 'antagonistic' China relations, says Citigroup

The Citibank Corporate Office & Headquarters in midtown Manhattan, New York. PHOTO: AFP

SINGAPORE (BLOOMBERG) - Donald Trump's administration may be on course for a fraught relationship with China amid disputes over trade policy, according to Citigroup, which warned the new US government could introduce more protectionist measures against manufactured goods from Asia's top economy.

"There are growing signs that the Trump administration is heading for antagonistic relations with China," the bank said in a report that examined how commodities including metals and farm goods may fare in the upcoming lunar year. While the bank stuck with its view that a trade war could be avoided, it did anticipate "increasing trade frictions" between the two.

Trump made trade relations a central theme of his election campaign, maintaining that the US was getting a raw deal from agreements ranging from Nafta to the putative Trans-Pacific Partnership. The new president hammered on an "America First" message in his inauguration speech, and his administration immediately vowed to withdraw from the Pacific deal.

"We are more likely to see the US aggressively targeting China in sectors where the US runs a large deficit with China or with significant SOE presence," Citigroup said, using initials for state-owned enterprises.

China has options to react, including bringing cases to the World Trade Organization, using countervailing measures and possibly banning exports of strategically important commodities such as rare earths, it said.

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