FLORIDA/BEIJING • The United States and China signalled hardening positions as they prepared for high-stakes talks in Washington yesterday to try and avoid an escalation in a year-old trade war that has cast a long shadow over financial markets and the global economy.
China's top trade envoy, Vice-Premier Liu He, landed in the US capital yesterday afternoon and went immediately into discussions with President Donald Trump's top negotiator, Mr Robert Lighthizer, with US tariffs on some US$200 billion (S$273 billion) worth of Chinese goods set to increase to 25 per cent at 12.01am today (12.01pm Singapore time today).
President Trump has said that China "broke the deal" it had reached in trade talks with the US, and vowed not to back down on imposing new tariffs on Chinese imports unless Beijing "stops cheating our workers".
In response, China promised to retaliate if the US President goes ahead and raises tariffs on Chinese goods, in a warning issued just before the delegation from Beijing was set to arrive yesterday in Washington.
"If the raising of tariffs is implemented on Friday, we will have to take countermeasures," Chinese Commerce Ministry spokesman Gao Feng said in Beijing.
"The US side has given many labels recently, 'backtracking', 'betraying'... China sets great store on trustworthiness and keeps its promises, and this has never changed," Mr Gao told reporters yesterday.
But Mr Trump told a cheering crowd at a rally in Florida on Wednesday: "I just announced that we'll increase tariffs on China and we won't back down until China stops cheating our workers and stealing our jobs, and that's what's going to happen, otherwise we don't have to do business with them."
THREAT OF TARIFFS
I just announced that we'll increase tariffs on China and we won't back down until China stops cheating our workers and stealing our jobs, and that's what's going to happen, otherwise we don't have to do business with them... They broke the deal. They can't do that. So they'll be paying.
UNITED STATES PRESIDENT DONALD TRUMP
"They broke the deal," he added. "They can't do that. So they'll be paying. If we don't make the deal, nothing wrong with taking in more than US $100 billion a year."
On Sunday, Mr Trump had threatened to levy tariffs on an additional US$325 billion worth of China's goods, on top of the US$250 billion of its products already hit by import taxes.
Based on 2018 US Census Bureau trade data, China would have only about US$10 billion worth of US imports left to levy in retaliation against any future US tariffs, including crude oil and large aircraft.
The world's two largest economies have been embroiled in a tit-for-tat tariff war since July last year over US demands that the Asian powerhouse adopt policy changes that would, among other things, better protect American intellectual property and make China's market more accessible to US companies.
Expectations were recently riding high that a deal could be reached, but a deep rift over the language of the proposed agreement opened up last weekend.
Reuters, citing US government and private-sector sources, reported on Wednesday that China had backtracked on almost all aspects of a draft trade agreement, threatening to blow up the negotiations and prompting Mr Trump to order the tariff increase.
Washington is demanding Beijing make sweeping changes to its trade and regulatory practices, including protecting US intellectual property from theft and forced transfers to Chinese firms, curbs on Chinese government subsidies and increased American access to China's markets.
Mr Trump also has sought massive hikes in Chinese purchases of US farm, energy and manufactured products to shrink a gaping US trade deficit with China.
The US Commerce Department said yesterday the politically sensitive goods trade deficit with China decreased 16.2 per cent to US$20.7 billion, the lowest level since March 2014, also as imports from the world's No. 2 economy fell 6.1 per cent. Exports to China jumped 23.6 per cent in March.
The overall trade deficit increased 1.5 per cent to US$50 billion in March. Data for February was revised slightly to show the trade gap falling to US$49.3 billion instead of US$49.4 billion as previously reported.
WASHINGTON POST, REUTERS
SEE OPINION: A US-China trade deal doesn't matter anymore