Trump mulls China trade clash
UNITED STATES/CHINA: A potentially disastrous trade conflict between the US and China is coming to the boil this week as a series of inflammatory documents are delivered to the White House and President Donald Trump prepares to impose sanctions.
Twin inquiries by the US Commerce Department could open the way for punitive measures against Chinese steel and aluminium shipments on national security grounds, while a highly-sensitive probe into intellectual property theft and cyber-espionage will deliver its findings on Friday.
Trump met his ultra-hawkish trade strategist, Robert Lighthizer, in Florida over the weekend to finalise plans, with the North American Free Trade Agreement (NAFTA) also in jeopardy.
Global assets markets have largely discounted the threat of a serious clash, instead celebrating the cyclical recovery of world shipping and deeming Trump’s bark worse than his bite.
They may have misread the political runes in Washington, underestimating lag-times as the complex machinery of the US government slowly shifts direction like a turning supertanker.
Lighthizer spelt out the new strategy in stark terms recently, accusing Beijing of predatory behaviour and abusive subsidies to capture global market share. ‘‘The sheer scale of their coordinated efforts to create national champions, to force technology transfer, and to distort markets in China and throughout the world is a threat to the world trading system that is unprecedented.
‘‘Years of talking about these problems has not worked. So, expect change, and expect action,’’ he said, warning that the White House would use ‘‘every instrument’’ available for a counterattack. The danger is this could backfire horribly since the Chinese leadership are in no mood to heed lectures and believe they have ample means to retaliate.
Carefully-planted stories in Beijing last week hinted that China might cut off purchases of US Treasuries if trade tensions escalate, even though the claims were officially denied. Sanctions against Boeing and soybeans are thought to be next on the menu.
‘‘The genie is out of the bottle and, if it were ever in doubt, China has reminded the US that it has tools to hit back,’’ said Allan von Mehren from Danske Bank.
Officials in Beijing are seething after the US blocked Ant Financial’s purchase of MoneyGram, and pressured AT&T into abandoning a deal to sell Huawei’s Mate 10 smartphone in the US over espionage concerns.
‘‘The warning signs that some sort of tough trade action by the Trump administration are unmis- takable. There’s a group of people supporting Trump that are real hawks,’’ said David Russel, the former US assistant secretary of state for East Asia.
Russel told a forum a key test is whether the Trump administration goes beyond redress mechanisms under the World Trade Organisation, opting instead to use sweeping presidential powers to act unilaterally. The White House has dusted off Section 301 of the 1974 Trade Act giving Trump licence to take ‘‘all appropriate action’’. This is the nuclear option in trade policy.
What is striking is that Washington has been pressing ahead with an aluminium case even though there has been no formal complaint from the US industries most affected, suggesting the White House is spoiling for a fight. The National Security Strategy report took the fateful step of naming China – along with Russia – as a rival that seeks to ‘‘challenge American power, influence and interests, attempting to erode American security and prosperity’’.
Beijing deemed it a slap in the face. ‘‘We urge the US side to stop deliberately distorting China’s strategic intentions and abandon such outdated concepts as the Cold War mentality and the zero-sum game – otherwise it will only end up harming itself as well as others,’’ said the foreign ministry.
The trade tensions come at a delicate juncture just as the two great economies start to diverge. A blast of fiscal stimulus is pushing the US towards an overheating boom, while China is slowing as fiscal spending cools and credit curbs bite deeper.
– Telegraph Group