US not in a trade war with China, says Donald Trump

"We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US," Trump said in a morning tweet. PHOTO: EPA-EFE

WASHINGTON - The White House is brushing off Beijing's threat to target American products with retaliatory tariffs, saying that bringing China into line on "fair and reciprocal" trade will be good for the United States and the international trading system.

Early on Wednesday (April 4), President Donald Trump tweeted: "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US. Now, we have a trade deficit of US$500 billion a year, with intellectual property theft of another US$300 billion. We cannot let this continue!

"When you are already US$500 billion down, you can't lose!"

Analysts by and large agree that the trade relationship needs readjustment. The concern about China had been building for some time, according to Mr Rod Hunter, a partner at law consultancy Baker McKenzie.

"China is an economic and a strategic competitor. The US-China relationship was going to get harder, no matter who got elected in 2016," he told The Straits Times.

With Beijing targeting largely pro-Trump agricultural states, taking on China over trade is also a political gamble for Mr Trump. And rising costs of imports and inputs will be passed on to American consumers, potentially offsetting gains from a buoyant economy and tax cuts.

But Mr Trump is fighting for American businesses and workers, insisted Dr Peter Navarro, a top aide and trade hawk who has long blamed free trade agreements and China in particular for costing American manufacturing jobs.

"That is going to be the difference," he told CNBC. "The problem is previous presidents have not had the back of corporate America; they have basically let corporate America go to China (and) get ripped off, and that has rebounded back on the American people and American manufacturers here.

"We are going to see what we are going to see, but the status quo cannot hold here. We can no longer have companies… go to China, surrender their technology and then have China come back and beat us in the marketplace unfairly and non-reciprocally.

"What we are trying to do is get to a place where we have fair and reciprocal trade, balanced trade across nations, and everybody trades freely in a way that textbooks write about but which we never get in reality."

Mr Ernie Bower, chief executive of consultancy BowerGroupAsia, told The Straits Times: "In the longer term, there does need to be an adjustment of the role China's economy plays in the Indo-Pacific and global economies.

"Unfortunately, it may have required as blunt an instrument as Trump and (US Trade Representative) Bob Lighthizer to force China to reckon with some of these structural adjustments.

"As China's economy matures and stabilises, it will need to move away from mercantilist tactics such as state-supported theft of intellectual property and regulatory extortion to control strategic industrial and service sectors."

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Meanwhile, certain countries could make major gains, but others could experience serious disruptions and distortions to their markets and investment flows, added Mr Bower.

In that context, the 11 nations that have signed up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) - including Singapore - would have a natural advantage over others outside the agreement as CPTPP countries would naturally attract global supply chains readjusting to adapt to the new realities.

The US' window for public consultations stretches well into late next month. Only after that will the list of Chinese imports it decides to tax be published and tariffs go into effect. It could be two months before that happens.

"There is an effort to try to not let this go out of control," Mr Jeff Schott, an international trade expert at the Peterson Institute for International Economics, told The Straits Times. "There are numerous scenarios for negotiations with China, and I think that is what the administration expects."

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