China defiant towards US on trade as Trump defends tariffs

The United States and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any 'bitter fruit' that harmed its interests.

WASHINGTON/BEIJING (REUTERS) - The United States and China appeared to be at a deadlock over trade negotiations on Sunday (May 12) as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any "bitter fruit" that harmed its interests.

The trade war between the world's top two economies escalated last Friday, with the United States hiking tariffs on US$200 billion (S$273 billion) worth of Chinese goods after US President Donald Trump said Beijing "broke the deal" by reneging on earlier commitments made during months of negotiations.

White House economic adviser Larry Kudlow told the Fox News Sunday programme that China needs to agree to "very strong" enforcement provisions for an eventual deal and said the sticking point was Beijing's reluctance to put into law changes that had been agreed upon.

He also said there is a "strong possibility" that Mr Trump will meet Chinese President Xi Jinping at a Group of 20 summit in Japan in late June.

Mr Kudlow said the US tariffs would remain in place while negotiations continue.

Beijing remained defiant.

"At no time will China forfeit the country’s respect, and no one should expect China to swallow bitter fruit that harms its core interests,” the People’s Daily, a newspaper controlled by the Chinese ruling Communist Party, said in a commentary on Monday.

It said Beijing was open to talks but would not yield on important issues of principle.

China’s nationalist Global Times tabloid said in an editorial on Monday that the country had no reasons to fear a trade war.

“The perception that China cannot bear it is a fantasy and misjudgment,” the commentary said.

“If they weren’t being seriously provoked, the Chinese people would not favour any trade war. However, once the country is strategically coerced, nothing is unbearable for China in order to safeguard its sovereignty and dignity as well as the long-term development rights of the Chinese people.”

China’s foreign ministry said on Monday the country will never surrender to foreign pressure.  Ministry spokesman Geng Shuang made the comments at a daily briefing in Beijing.  Geng declined to comment on what countermeasures China planned. 

On Sunday, Mr Trump sought to portray the US as being in an advantageous position.

"We are right where we want to be with China," he wrote on Twitter, saying US purchasers of Chinese goods could either buy them from domestic manufacturers or from other nations.

He also repeated an erroneous statement that the US would be taking in "tens of billions of dollars in tariffs from China".

 
 
 
 

He added: “We will then spend (match or better) the money that China may no longer be spending with our Great Patriot Farmers (Agriculture), which is a small percentage of total Tariffs received, and distribute the food to starving people in nations around the world!"

The tariffs are not paid by the Chinese government or by firms located in China. They are paid by importers of Chinese goods, usually American companies or the US-registered units of foreign companies. These often pass on the costs to customers, mostly manufacturers and consumers in the US.

Mr Kudlow, when asked who was paying, said "both sides will suffer on this", contradicting Mr Trump, although he added that the US economy should be able to cope.

"We're in terrific shape in order to correct 20 years plus of unfair trading practices with China," Mr Kudlow said. "This is a risk we should and can take without damaging our economy in any appreciable way."

G-20 SUMMIT

Until last week, there were expectations Mr Trump and Mr Xi would sign a trade deal at the G-20 summit. However, the trade talks suffered a major setback last week when China proposed extensive revisions to a draft agreement.

Beijing wanted to delete prior commitments that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.

Vice-Premier Liu He, China's top economic adviser, sought to defend the changes in talks with senior US officials in Washington last Thursday and Friday, arguing that China could accomplish the policy changes through decrees issued by its State Council, or Cabinet, sources familiar with the talks said.

US Trade Representative Robert Lighthizer rejected that, telling Mr Liu that the US was insisting on restoration of the previous text.

 

"We would like to see these corrections in an agreement which is codified by law in China, not just a State Council announcement. We need to see something much clearer. And until we do, we have to keep our tariffs on," Mr Kudlow said.

China strongly opposes the latest US tariff hike, and must respond to that, Mr Liu told reporters last Saturday.

Mr Kudlow said on Sunday he expected retaliatory tariffs to kick in but that it had not yet happened.

Mr Trump has ordered Mr Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect about an additional US$300 billion worth of goods.

Mr Lighthizer said a final decision on that has not yet been made but it would come on top of the Friday tariff rate increase to 25 per cent from 10 per cent on US$200 billion worth of Chinese imports.

US farmers, a key constituency of Mr Trump's, have been among the hardest hit in the trade war, with soybean shipments to China dropping to a 16-year low in 2018.