US-China trade war fears escalate with more threats

Trump argues pain of the dispute will pay off in the end

WASHINGTON: The escalating trade confrontation between Washington and Beijing threatened to boil over after President Donald Trump lashed out again and China called on the European Union to join the battle, sending global stocks into the red.

Trump remained defiant and argued the pain of the dispute will pay off in the end while China said Trump’s administration would only “shoot itself in the foot” if it didn’t back down from the “extremely wrong” threats.

Treasury Secretary Steven Mnuchin acknowledged there was a risk of trade war, but said the intention is to defend US interests and the administration remains willing to negotiate.

But top White House economic adviser Larry Kudlow reversed himself and warned that the tariff threat is not a negotiating tactic. Global stock markets were unhappy with the turn of events as Wall Street dropped more than 2%, following European and Asian markets lower.

In the wake of the decision to impose steep tariffs on steel and aluminium imports, the US on Tuesday published a list of $50 billion in Chinese goods to be hit by tariffs over what Washington says is widespread theft of intellectual property and technology.

China retaliated by unveiling planned levies on $50 billion worth of major US exports including soybeans, cars and small aircraft.

Trump hit back again late Thursday, instructing trade officials to consider tariffs on an additional $100 billion in imports.

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Trump said, calling Beijing’s reaction unfair.

So far, only the tariffs on steel and aluminium have taken effect, but Trump’s latest threats take the dispute to a new level. China cannot retaliate in kind since it only imports $130 billion in US products, meaning it would have to find another way to respond. Amid widespread concern and calls for restraint from US businesses and farm states that are most vulnerable to Chinese retaliation, Trump said on Friday the outcome would be worth the short-term risk.

“I’m not saying there’s not going to be any pain,” he told WABC radio in New York, but “we’re going to be much stronger for it.”

Speaking on CNBC, Mnuchin said Trump is not aiming to provoke a conflict with China, but he is determined to defend US interests and “there is the potential of a trade war.”

However, he said the White House is willing to negotiate and is in regular contact with Chinese officials. He argued that the situation could be a win-win for China and the US if Beijing opens up its economy. China vowed to fight back immediately and without hesitation, state media said.

“It is a battle between unilateralism and multilateralism and between protectionism and free trade as well,” Commerce Ministry spokeperson Gao Feng said, according to official news agency Xinhua. He warned that any threat to multilateralism would severely imperil the global economic recovery.

China also urged the European Union to join it in taking a clear stance against US protectionism, calling for Brussels and Beijing to “jointly preserve the rules-based multilateral trade order,” said Zhang Ming, head of the Chinese mission to the EU. The Chinese appeal came after it filed two complaints at the World Trade Organisation claiming the US has violated global trading rules, a charge the White House dismissed.

Published in The Express Tribune, April 8^th, 2018.

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