US offer for trade talks welcomed

Countermeasures still planned if Washington imposes new tariffs

The Ministry of Commerce confirmed on Thursday that China has received an invitation from the United States to reopen trade talks, saying it welcomes the move.

Analysts warned that the US risks underestimating China’s capability to hit back if it continues to impose tariffs on more Chinese goods.

Gao Feng, a ministry spokesman, said China and the US currently are communicating on many specific details, and the escalation of trade friction is inconsistent with the interests of either party.

His comments came after top White House economic adviser Larry Kudlow said on Wednesday the US government has invited Chinese officials to restart trade talks.

The outreach comes as the world’s two largest economies are embroiled in trade disputes, with US President Donald Trump poised to decide whether to raise duties on $200 billion of Chinese goods — or on even more.

To safeguard the interests of its exporters, manufacturers and other businesses, China has already vowed to “definitely take countermeasures” if the US raises tariffs further.

Gary Hufbauer, a senior fellow and trade expert at the Peterson Institute for International Economics in Washington, said Trump is concerned about the adverse financial market consequences as a result of trade tensions and the ensuing political effects if he imposes higher tariffs ahead of the November midterm elections.

“Trump wants to show the Congress and companies that object to the proposed tariffs that he is a reasonable man, willing to negotiate (with China) before taking action.”

US businesses in China also fear that the threat of additional tariffs on $200 billion in Chinese goods would generate strong negative impacts on their operations in China.

The results of a joint survey by the American Chamber of Commerce in China and American Chamber of Commerce in Shanghai were released on Thursday. It measured the impact of the tariffs imposed by China and the US on each other since July.

Close to two-thirds of respondents said the tariffs are having a negative impact.

The survey said 63.6 percent reported the initial US tariffs on $50 billion in Chinese goods are affecting their business operations. When asked about the implementation of the possible additional US and Chinese tariffs, the proportion of members who cited a negative impact jumped to 74.3 percent and 67.6 percent, respectively.

The percentage reporting a “strong negative impact” in that case doubled from 21.5 percent to 47.2 percent for the US tariffs. Over 430 companies responded to the survey.

“The White House has threatened to fire the next barrage of tariffs at $200 billion more in Chinese goods, expecting with this onslaught, or subsequent ones, China will wave a white flag. But that scenario risks underestimating China’s capability to continue meeting fire with fire,” said William Zarit, chairman of AmCham China.

“The US administration runs the risk of a downward spiral of attack and counterattack, benefiting no one,” Zarit said.

The US’ invitation to China to restart trade talks suggests the Donald Trump administration has changed its idea about settling trade disputes. But the decision is more likely based on its realization that the damage inflicted on domestic industries and consumers by the Trump-ignited tariff war would become unbearable, so it’s better to use nondestructive means to settle the trade disputes with China.

If that is the case, the US move holds promise. But this promise could be deceptive.

While announcing that US Treasury Secretary Steven Mnuchin had sent the invite to senior Chinese officials, Larry Kudlow, White House’s top economic adviser, said on Wednesday: “I think most of us think it’s better to talk than not to talk, and I think the Chinese government is willing to talk.”

But then came the rider, as Kudlow said: “I guarantee nothing.” It is indeed rare for a responsible official to issue such a caution. Especially, after the Aug 22-23 talks between midlevel Chinese and US officials ended without any agreements.

After imposing high tariffs on $50 billion worth of Chinese goods, the United States threatened to slap tariffs on another $200 billion of Chinese imports. If that too did not force China to accept its demands, the US said, it would make preparations to impose high tariffs on an additional $267 billion of Chinese goods.

But then suddenly the US administration changed tack. Perhaps the opposition of a large number of US enterprises to the high tariffs on imports at the late August public hearings on the Section 301 tariff list prompted the Trump administration to reconsider its unilateral and protectionist tariff policies.

According to an AmCham China and AmCham Shanghai survey covering more than 430 US companies operating in China, most of the respondents said the Sino-US trade friction would have a far-reaching negative impact on their businesses, with rising costs being their top concern.

China’s stance has always been consistent. It knows full well talks are the best and only way to resolve bilateral disputes. Still, it will not hesitate to take countermeasures against US tariffs to safeguard China’s interests.

China welcomes and, more importantly, is serious about the trade talks. And it would like to believe the Trump administration is equally serious about resolving the trade disputes through talks.

But the Trump administration should not be mistaken that China will surrender to the US demands. It has enough fuel to drive its economy even if a trade war is prolonged.