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Thursday, April 05, 2018

U.S. Expects Talks With China As Trade Fight Escalates


FILE PHOTO: LED lights are on display inside a booth at the Canton Fair in Guangzhou
FILE PHOTO: LED lights are on display inside a booth at the Canton Fair in Guangzhou, China October 16, 2017. REUTERS/Venus Wu/File Photo
April 5, 2018
By David Lawder and Michael Martina
WASHINGTON/BEIJING (Reuters) – The United States voiced willingness on Wednesday to negotiate a resolution to an escalating trade fight with China after Beijing retaliated against proposed U.S. tariffs on $50 billion in Chinese goods by targeting key American imports, but the Chinese ambassador to Washington said it “takes two to tango.”
(Graphic: U.S. trade in goods with China – http://tmsnrt.rs/2GcOZIH)
Just 11 hours after President Donald Trump’s administration proposed 25 percent 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 spiraling dispute between the world’s two economic superpowers that could harm the global economy.
(Graphic: U.S. imports from China – http://tmsnrt.rs/2FMsz1Q)
While Trump posted defiant messages on Twitter, his administration signaled possible wiggle room.
Asked whether the U.S. 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 U.S. 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 U.S. will do,” the ambassador said afterward.
The trade actions will not be carried out immediately, so there may be room for maneuver. 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 U.S. action takes effect.
If the two countries are unable to settle the dispute, a full-scale trade war could destabilize U.S.-Chinese commercial ties, an important component of the global economy.
China’s action rattled U.S. farmers, while shares in U.S. 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 percent higher as investors turned their focus to earnings and away from the trade fight.
White House spokeswoman Sarah Sanders said U.S. implementation of the tariffs would depend on China’s behavior.
“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 behavior of China and they don’t stop the unfair trade practices, then we would move forward,” Sanders 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 U.S.”
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 U.S. 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 U.S. 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 U.S.-China trade war will result in “a bumpy ride” for the U.S. economy, said James Bullard, president of the Federal Reserve Bank of St. Louis.
China said its list of 25 percent additional tariffs on U.S. goods covered 106 items with a trade value matching the $50 billion targeted on Washington’s list.
U.S.-made goods that appear to face added tariffs in China include Tesla Inc electric cars, Ford Motor Co’s Lincoln auto models, Gulfstream jets made by General Dynamics Corp and Brown-Forman Corp’s Jack Daniel’s whiskey.
Information technology products, from cellphones to personal computers, largely escaped the latest salvo of U.S.-China trade measures despite accounting for a significant portion of bilateral trade.
China ran a $375 billion goods trade surplus with the United States in 2017. Trump has demanded that the China cut the trade gap by $100 billion.
The U.S. move was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies to Chinese competitors, charges Chinese officials deny.
The U.S. tariff list followed China’s imposition of tariffs on $3 billion worth of U.S. fruits, nuts, pork and wine to protest U.S. steel and aluminum tariffs imposed last month by Trump.

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