US expects talks with China as trade fight escalates

Cui Tiankai (left), China's ambassador to the US, and US President Donald Trump's top economic adviser, Larry Kudlow. Beijing's swift and forceful response raised the prospect of a quickly spiralling dispute between the world's two economic superpowe
Cui Tiankai (left), China's ambassador to the US, and US President Donald Trump's top economic adviser, Larry Kudlow. Beijing's swift and forceful response raised the prospect of a quickly spiralling dispute between the world's two economic superpowers that could harm the global economy. PHOTOS: REUTERS, AFP

WASHINGTON/BEIJING (REUTERS, BLOOMBERG) - The United States voiced willingness on Wednesday (April 4) to negotiate a resolution to an escalating trade fight with China after Beijing retaliated against proposed US tariffs on US$50 billion (S$65.5 billion) in Chinese goods by targeting key American imports, but the Chinese ambassador to Washington said it "takes two to tango".

Just 11 hours after President Donald Trump's administration proposed 25 per cent tariffs on some 1,300 Chinese industrial, technology, transport and medical products, China shot back with a list of similar duties on major American imports including soybeans, planes, cars, beef and chemicals.

Beijing's swift and forceful response raised the prospect of a quickly spiralling dispute between the world's two economic superpowers that could harm the global economy.

While Trump posted defiant messages on Twitter, his administration signalled possible wiggle room.

Asked whether the US tariffs announced on Tuesday may never go into effect and may be a negotiating tactic, Trump's top economic adviser, Larry Kudlow, told reporters: "Yes, it's possible. It's part of the process." He called the announcements by the two countries mere opening proposals.

Kudlow later told Fox News Channel: "I don't think it's a trade war. I think there is going to be intense negotiations on both sides."

"I think we're going to come to agreements," he said, adding that "I believe that the Chinese will back down and will play ball".

Cui Tiankai, China's ambassador to the United States, held an hour-long meeting at the US State Department in Washington with acting Secretary of State John Sullivan.

"Negotiation would still be our preference, but it takes two to tango. We will see what the US will do," the ambassador said afterward.

The trade actions will not be carried out immediately, so there may be room for manoeuvre. Publication of Washington's list on Tuesday started a period of public comment and consultation expected to last around two months. The effective date of China's moves depends on when the US action takes effect.

If the two countries are unable to settle the dispute, a full-scale trade war could destabilise US-Chinese commercial ties, an important component of the global economy.

 
 

China's action rattled US farmers, while shares in US exporters of everything from planes to tractors were volatile.

After dropping at the outset of trading, Wall Street's three major indexes staged a comeback to close about 1 per cent higher as investors turned their focus to earnings and away from the trade fight.

White House spokesman Sarah Sanders said US implementation of the tariffs would depend on China's behaviour.

"It's going to be a couple months before tariffs on either side would go into effect and be implemented and we're hopeful that China will do the right thing," she told reporters.

"I would anticipate that if there are no changes to the behaviour of China and they don't stop the unfair trade practices, then we would move forward," Sanders said.

Echoing her comments, China’s Deputy Finance Minister Zhu Guangyao told reporters after a news conference in Beijing on Thursday the implementation of China’s tariffs would depend on the outcome of bilateral negotiations, as well as US decisions. “We believe both countries have the ability and wisdom to address the problem,” Zhu said.

Trump, who contends his predecessors served the United States badly in trade matters, wrote on Twitter: "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".

POLITICAL DAMAGE

While Washington targeted products that benefit from Chinese industrial policy - including its "Made in China 2025"initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics - Beijing appeared to offer a response intended to inflict political damage.

Washington's list was filled with many obscure industrial items, but China's struck at signature US exports, including soybeans, frozen beef, cotton and other agricultural commodities produced in states from Iowa to Texas that voted for Trump in the 2016 presidential election.

The list extends to tobacco and whiskey, both produced in states including Kentucky, home of US Senate Majority Leader Mitch McConnell, like Trump a Republican.

Trump said last month that "trade wars are good, and easy to win," but key fellow Republicans expressed unease over the latest developments.

McConnell said he was nervous about the "growing trend in the administration to levy tariffs" that could become a "slippery slope", while Senator Chuck Grassley, whose home state of Iowa is a major agricultural producer, said: "Farmers and ranchers shouldn't be expected to bear the brunt of retaliation for the entire country."

The possibility of an escalating US-China trade war will result in "a bumpy ride" for the US economy, said James Bullard, president of the Federal Reserve Bank of St Louis.

China said its list of 25 per cent additional tariffs on US goods covered 106 items with a trade value matching the US$50 billion targeted on Washington's list.

US-made goods that appear to face added tariffs in China include Tesla electric cars, Ford Motor's Lincoln auto models, Gulfstream jets made by General Dynamics and Brown-Forman Corp's Jack Daniel's whiskey.

Information technology products, from cellphones to personal computers, largely escaped the latest salvo of US-China trade measures despite accounting for a significant portion of bilateral trade.

China ran a US$375 billion goods trade surplus with the United States in 2017. Trump has demanded that the China cut the trade gap by US$100 billion.

The US move was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of US intellectual property and forced technology transfer from US companies to Chinese competitors, charges Chinese officials deny.

The US tariff list followed China's imposition of tariffs on US$3 billion worth of US fruits, nuts, pork and wine to protest US steel and aluminium tariffs imposed last month by Trump.