Trump’s trade ‘extortion’ won’t work: China
Beijing seeks to reassure investors as trade jitters batter markets
SHANGHAI/BEIJING: Chinese state media yesterday lambasted U.S. President Donald Trump’s trade policies in an unusually personal attack, and sought to reassure investors anxious about China’s economy as growth concerns battered its financial markets.
China’s strictly controlled news outlets have frequently rebuked the United States and the Trump administration as the trade conflict has escalated, but they have largely refrained from specifically targeting Trump. The latest criticism from the overseas edition of the ruling Communist Party’s People’s Daily newspaper singled out Trump, saying he was starring in his own “street fighter-style deceitful drama of extortion and intimidation”.
Trump’s desire for others to play along with his drama is “wishful thinking”, a commentary on the paper’s front page said, arguing that the United States had escalated trade friction with China and turned international trade into a “zerosum game”. “Governing a country is not like doing business,” the paper said, adding that Trump’s actions imperilled the national credibility of the United States. The heated dispute between the world’s two biggest economies has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent months. Last month, the International Monetary Fund warned that escalating trade conflicts following US tariff actions on its trading partners threaten to derail the global economic recovery. The United States and China implemented tariffs on $34 billion worth of each other’s goods in July. Washington is expected to soon implement tariffs on an additional $16 billion of Chinese goods, which China has already said it will match immediately. On Friday, China’s finance ministry unveiled new sets of additional tariffs on 5,207 goods imported from the United States worth $60 billion.
That move was in response to the Trump administration’s proposal of a 25-percent tariff on $200 billion worth of Chinese imports. The trade war, rising corporate bankruptcies, and a steep decline in the value of the yuan versus the dollar have raised concerns that China’s economy could face a steeper slowdown. Recent data showed growth has already started to cool. The government has responded by releasing more liquidity into the banking system, encouraging lending and promising a more “active” fiscal policy. US companies are putting in place measures to cushion the impact of the trade row, including price hikes, and a number of companies - from industrial firms to home furnishers and toymakers - have said they will move some sourcing and manufacturing outside of China. China’s exports are expected to have maintained solid growth in July despite the new tariffs on billions of dollars of shipments to the United States, though the outlook has darkened as both sides raised the stakes in the trade brawl.
China markets take hit
The vitriol from the People’s Daily follows Trump’s comments on Twitter from Saturday in which he boasted that his strategy of placing steep tariffs on Chinese imports was “working far better than anyone ever anticipated”, and that Beijing was now talking to the United States about trade.
Trump cited losses in China’s stock market as he predicted the US market could “go up dramatically” once trade deals were renegotiated. China’s stocks were lower yesterday as Beijing’s latest tariff threats escalated the tit-fortat Sino-US trade war, while the yuan weakened after briefly edging up despite the central bank’s latest efforts to shore up the tumbling currency.
Michael McCarthy, Sydney-based chief market strategist at CMC Markets and Stockbroking, wrote in a note to clients that while China’s proposed new tariffs appeared proportionate, “White House tweets claiming an upper hand for the US over the weekend risk another round of confidence sapping exchanges.” A flurry of articles in Chinese state media emphasized the resilience of China’s economy and downplayed concerns about the impact of the Sino-US trade war.
“Market participants foresee a relatively stable Chinese currency in the near term, without fear of impacts from the US-China trade dispute. They expect solid economic growth momentum amid policy fine-tuning,” an article in the official English-language China Daily newspaper said, citing Chinese economists. On Friday, the People’s Bank of China said it would require banks to keep reserves equivalent to 20 percent of their clients’ foreign exchange forwards positions from yesterday, in a move to stabilize the yuan. “Leading China’s economy on a stable and far-reaching path, we have confidence and determination,” another commentary in the main edition of the People’s Daily said.
Trump has threatened tariffs on over $500 billion in Chinese goods, covering virtually all US imports from the Asian giant, demanding that Beijing make fundamental changes to its policies on intellectual property protection, technology transfers and subsidies for high technology industries. The nationalist Global Times, responding in an editorial late on Sunday to White House economic adviser Larry Kudlow’s remarks that China should not underestimate Trump’s resolve, said China did not fear “sacrificing shortterm interests”. “China has time to fight to the end. Time will prove that the US eventually makes a fool of itself,” the Global Times said.
China proposes new tariffs as trade war heats up