China has warned that it is ready to pay any price in a possible trade war with the United States, hours after President Donald Trump threatened to impose tariffs on another US$100 billion (S$132 billion) worth of Chinese goods as trade relations continue to deteriorate.
"If the US side disregards opposition from China and the international community and insists on carrying out unilateralism and trade protectionism, the Chinese side will follow through, at any costs, till the end," the Ministry of Commerce said in a statement yesterday.
In a last-minute press conference held last night, Commerce Ministry spokesman Gao Feng also said the US had made a "grave mistake" that was akin to cutting off its nose to spite its own face. If the US carries out its threat of new tariffs, "China has already made ample preparations and will respond forcefully and without hesitation", he said.
On Thursday, Mr Trump said he had ordered officials to look at a new round of tariffs "in light of China's unfair retaliation" against earlier US trade actions. This came after China said on Wednesday that it would impose 25 per cent tariffs on 106 US products worth US$50 billion, ranging from soya beans to cars to aeroplanes.
Chinese state media yesterday denounced Mr Trump's latest threat, with nationalistic tabloid Global Times saying it reflected "the deep arrogance of some American elites in their attitude towards China". Party mouthpiece People's Daily also alluded to the shifting Sino-US economic relationship, and that Mr Trump's latest threat showed the US' "sinister intention of using a trade war to contain China's development".
While rising trade tensions have roiled markets, experts said the greater implication for Asia should the tariffs take effect is the risk to economic growth.
OCBC economist Selina Ling noted that the stand-off comes just as economic indicators suggest the growth momentum has peaked.
Whether Asian economies will benefit from the fight remains debatable, she added.
The immediate impact of these tariff salvos is greater inflation, said DBS chief economist Taimur Baig, as sanctions cause supply diversion, market disruption and the postponement of capacity expansion, all of which point to higher costs of doing business.
"Raw material prices, already on an uptrend since mid-2017, will likely be pushed up further as hoarding and speculation take place in anticipation and reaction to tariffs," he added.
Observers noted that while both sides have continued exchanging blows, neither has shut the door on negotiations as they are aware of how interdependent their econo-mies are today, with neither having a clear upper hand.
But Mr Rod Hunter, a partner at Washington-based law firm Baker McKenzie, described Mr Trump's strategy as "a high-stakes way of negotiating". "It is a dramatic bargaining position, but it is as if they are flashing their weapons but not actually firing bullets. The risk is that the threat-for-threat process spins out of control and we end up in a position in which leadership on both sides find it difficult to negotiate to a suitable outcome," he said.
The White House said yesterday it has initiated a World Trade Organisation dispute against China and is examining potential restrictions on Chinese investment. It is also "working with allies also affected by China's unfair behaviour to restore fairness to global trade".
NO HOLDING BACK
If the US side disregards opposition from China and the international community and insists on carrying out unilateralism and trade protectionism, the Chinese side will follow through, at any costs, till the end.
CHINA'S MINISTRY OF COMMERCE
Chinese direct investment in the US has grown quickly in the past decade to almost US$70 billion, fast approaching the US$75 billion that the US has invested in China over several decades.
OCBC's Ms Ling said: "At the end of the day, China is still the largest foreign owner of US Treasury bonds with nearly US$1.2 trillion of the securities, but (any sell-down) would be close to a nuclear option."
- Additional reporting by Nirmal Ghosh in Washington