The US asked China in a letter last week to cut the tariff on US autos, buy more US-made semiconductors and give US firms greater access to the Chinese financial sector, the Wall Street Journal reported yesterday, citing unnamed sources.
Alarm over a possible trade war between the world’s two largest economies has chilled financial markets as investors foresee dire consequences should trade barriers go up due to US President Donald Trump’s bid to cut the nation’s deficit with China.
US Secretary of the Treasury Mnuchin and US Trade Representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He (劉鶴), a newly appointed vice premier who oversees China’s economy, the newspaper said, quoting sources with knowledge of the matter.
Photo: Reuters
The newspaper reported that Mnuchin was considering a visit to Beijing to pursue negotiations.
Fears of a trade war mounted earlier this month after Trump first slapped tariffs on steel and aluminum imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to US$60 billion of Chinese goods.
On Friday, China fired a warning shot in response to the US tariffs on steel and aluminum by declaring plans to levy additional duties on up to US$3 billion of US imports.
Beijing could also inflict pain on US multinationals that rely on China for a substantial — and growing — portion of their total revenues, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments.
“This could put US companies such as Apple, Microsoft, Starbucks, GM, Nike, etc. in the firing line,” Wolf said.
China can increase the regulatory burden on US companies through new inspections and rules; ban travel; stop providing export licenses of key intermediate goods; raise the tax burden on US multinationals in China; or block US companies from the government procurement market, he said.
Trump unveiled the planned tariffs targetting Chinese goods after a US inquiry found China guilty of intellectual property theft and unfair trade practices by forcing US investors to turn over key technologies to Chinese firms.
On Saturday, Liu told Mnuchin in a telephone call the US inquiry violated international trade rules and Beijing would defend its interests, Xinhua news agency reported.
A US Treasury spokesman confirmed the call, but declined to comment on the content of any letter or on a possible visit by Mnuchin to Beijing.
“Secretary Mnuchin called Liu He to congratulate him on the official announcement of his new role,” the spokesman said. “They also discussed the trade deficit between our two countries and committed to continuing the dialogue to find a mutually agreeable way to reduce it.”
The Trump administration has demanded that China immediately cut its staggering US$375 billion trade surplus with the US by US$100 billion.
“The US has been wielding sticks worldwide over the past year. Washington needs to be taught a real lesson and such a lesson can only be taught by China, the world’s second-largest economy,” Global Times said in an editorial.
The widely read tabloid is run by the Chinese Communist Party’s official People’s Daily, although its stance does not necessarily equate with government policy.
“What we have to recognize is China hasn’t measured up to the things we expected of them, in terms of the trade relationship,” said William Cohen, chairman of Cohen Group, a Washington-based advisory firm.
“My hope is that they will see this is not the way to go, that we do have to sit and work out an arrangement where the Chinese understand you can’t do business the way they’ve been doing business,” the former US secretary of defense said on the sidelines of a forum in Beijing on Sunday.
A commentary published by Xinhua warned the US against provoking retaliation by China.
“Washington should take Beijing’s stance seriously and do not be penny wise and pound foolish, which will hurt itself and others as well,” Xinhua said.
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