US President Donald Trump yesterday urged patience in trade talks with China, saying that there is “no need to rush” after the US enacted a steep hike in tariffs on Chinese products and Beijing vowed to hit back.
Locked in a trade dispute for more than a year, officials from the world’s two biggest economies returned to the bargaining table late on Thursday, led by Chinese Vice Premier Liu He (劉鶴), US Trade Representative Robert Lighthizer and US Secretary of the Treasury Steven Mnuchin.
“Talks with China continue in a very congenial manner — there is absolutely no need to rush — as Tariffs are NOW being paid to the United States by China,” Trump said on Twitter yesterday morning.
Photo: Reuters
The US increased punitive duties on US$200 billion of Chinese imports from 10 to 25 percent just hours earlier, with the Chinese Ministry of Commerce saying that it “deeply regrets” the move and repeating its pledge to take “necessary countermeasures.”
The president also said that tariffs were in some ways preferable to reaching a trade deal at all.
“Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind,” Trump wrote, outlining a plan in which Washington would use money from tariffs to buy US agricultural products and give them to poor countries.
Since last year, the two sides have exchanged tariffs on more than US$360 billion in two-way trade, gutting US agricultural exports to China and weighing on both countries’ manufacturing sectors.
Trump began the standoff because of complaints about unfair Chinese trade practices.
The US team late on Thursday night met with Trump to brief him and “agreed to continue discussions” yesterday, the White House said in a statement.
Lighthizer and Mnuchin met the Chinese delegation for about 90 minutes on Thursday evening and they had a working dinner with Liu.
Despite optimism from officials in the past few weeks that the talks were moving toward a deal, tensions reignited this week after Trump angrily accused China of trying to backpedal on its commitments.
“They took many, many parts of that deal and they renegotiated. You can’t do that,” Trump said on Thursday.
Moody’s Investors Service managing director Michael Taylor said that the tariff hike “further raises tensions” between the two countries.
“While we believe that a trade deal will eventually be reached between the US and China, the risk of a complete breakdown in trade talks has certainly increased,” Taylor said.
The renewed tensions this week roiled global stock markets and unnerved exporters, although Chinese shares led gains across most Asian and European markets yesterday.
Liu said on his arrival in Washington that the prospects for the talks were “promising,” but warned that raising tariffs would be “harmful to both sides” and called for cooperation.
“I hope to engage in rational and candid exchanges with the US side,” he told Chinese state media. “Of course, China believes raising tariffs in the current situation is not a solution to the problem, but harmful to China, to the United States and to the whole world.”
The higher duty rates are to hit a vast array of Chinese-made electrical equipment, machinery, automotive parts and furniture.
However, due to a quirk in the implementation of the higher tariffs, products already on ships headed for US ports before midnight would only pay the 10 percent rate, US Customs and Border Protection said.
That could effectively provide a grace period for the sides to avert serious escalation.
“While we are disappointed that the stakes have been raised, we nevertheless support the ongoing effort by both sides to reach agreement on a strong, enforceable deal that resolves the fundamental, structural issues our members have long faced in China,” the American Chamber of Commerce in China said.
The US is pressing China to change its policies on protections for intellectual property, end massive subsidies for state-owned firms and reduce a yawning trade deficit.
American Enterprise Institute China expert Derek Scissors said that the two sides had clashed over how much of the final trade agreement should be enshrined in a public document, something Beijing has long resisted.
“What the Chinese step-back primarily says is they don’t want to publicly acknowledge that their existing laws, especially on IP [intellectual property], are flawed,” he told reporters.
Washington is counting on the strong US economy to be able to withstand the effects of higher costs from the import duties and retaliation better than China, which has seen its growth slow.
A Chinese central bank adviser told state-run Financial News that Trump’s tariff hike and Chinese retaliation would lower economic growth by 0.3 percentage points.
It is “within a controllable range,” Tsinghua University Center for Finance and Development director Ma Jun (馬駿) said.
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