Beijing stays calm over US tariff threat

A trade war could damage US President Donald Trump's chances of re-election.
A trade war could damage US President Donald Trump's chances of re-election.PHOTO: EPA-EFE

Measured response differs from earlier reactions to similar moves

China has responded in measured fashion to the United States' announcement that it would go ahead with tariffs on US$50 billion (S$67 billion) of Chinese imports, unlike its earlier strong reactions to US tariff threats.

This is because Washington's move is possibly a negotiating tactic to pressure Beijing ahead of Commerce Secretary Wilbur Ross' visit here for trade talks this week, a Chinese economist has said. It is also China's way of giving US President Donald Trump room to retreat as both sides do not really want a trade war, said Professor Yuan Gangming of Tsinghua University.

The White House announced on Tuesday that the US was going ahead with 25 per cent tariffs on Chinese imports it first announced last month, saying these would target goods containing "industrially significant technology" that are related to China's Made in China 2025 strategy to move its industries up the value chain through innovation.

It would also implement investment restrictions and enhanced export controls aimed at limiting access of Chinese companies and investors to American technology.

The State Department also said it planned to shorten the length and validity of some visas for Chinese citizens. No specifics were given, but a US official quoted by Associated Press said Chinese graduate students would get only one-year visas if they were studying in areas such as robotics and high-tech manufacturing, identified by China as priorities in its Made in China 2025 plan.

The Chinese Foreign Ministry yesterday called the announcement a "betrayal of the joint communique China has reached with the US" in Washington earlier this month.

Chinese analysts are of the view that a trade war is not imminent as both sides do not want one, given the huge costs to their economies if one were to take place.

Its spokesman Hua Chunying urged the US to be "as good as its word and meet China halfway in line with the communique".

In the joint statement, the two sides agreed to suspend tit-for-tat tariffs and continue negotiation on reducing the US trade deficit.

Ms Hua reiterated that China does not want to fight a trade war but does not fear one. If the US acts in an arbitrary and reckless manner, "China will take firm and strong measures to safeguard our legitimate benefits", she said.

Her comments followed those of the Ministry of Commerce on Tuesday night that also urged the US to meet China halfway. It added that no matter what measures the US took, China had the confidence, ability and experience to safeguard its people's interests and the core interests of the nation.

The ministries' responses were a far cry from those last month when the US first announced tariffs on US$50 billion worth of Chinese goods and later the possibility of another round of tariffs on US$100 billion worth of goods.

China's response to the first announcement was to announce retaliatory tariffs on US$50 billion of US goods. To the second, Beijing said it "will not hesitate to immediately make a fierce counter strike".

Chinese media were less circumspect with the nationalistic Global Times saying: "If the US wants to play games, then China would be more than willing to play along and do so until the very end."

Still, Chinese analysts are of the view that a trade war is not imminent as both sides do not want one, given the huge costs to their economies if one were to take place.

For Mr Trump, in particular, it could damage his chances of re-election, said economist Hu Xingdou. Instead of a trade war, Mr Trump wanted to take measures to inhibit Chinese technological development, he added.

Prof Hu said what China could do is to import more US goods, increase protection of intellectual property and increase its pace of opening up its markets.

He added that Beijing could also respond to the US' and the West's concerns about unfair treatment of their companies as a result of the Made in China 2025 plan, by reducing or removing subsidies to Chinese firms. "These subsidies are controversial," he said, adding that some Chinese think they weaken competitiveness and lead to overcapacity.

The American business community in China is of the view that the US use of tariffs is a positive move.

While acknowledging tariffs are a blunt instrument, Mr William Zarit, chairman of the American Chamber of Commerce in China, said the "upside is we are in intense negotiation with the Chinese now in a way we have not been for so many years".

A version of this article appeared in the print edition of The Straits Times on May 31, 2018, with the headline 'Beijing stays calm over US tariff threat'. Print Edition | Subscribe