US missive to China spells out request for drop in trade surplus
THE US asked China in a letter last week to cut the tariff on US vehicles, buy more USmade semiconductors and give its firms greater access to the Chinese financial sector, the Wall Street Journal reported yesterday.
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 President Donald Trump’s bid to cut the US deficit with China.
Treasury secretary Steven Mnuchin and US trade representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He, a newly appointed vice-premier who oversees China’s economy, the Journal said, quoting sources with knowledge of the matter.
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 aluminium imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to $60 billion (R702bn) of Chinese goods.
On Friday, China fired a warning shot in response to the US tariffs on steel and aluminium by declaring plans to levy additional duties on up to $3bn of US imports.
The list of targeted goods made no mention of soy beans or aircraft, China’s two biggest US import items.
China’s third-biggest US import category – motor vehicles – totalled $10.6bn in 2017, about 8 percent of the country’s overall US imports by value, according to data from the US Census Bureau.
China currently has a 25 percent tariff on US cars.
China purchased $2.6bn of semiconductors from the US last year, or 1 percent of China’s total semiconductor imports, Chinese customs data shows.
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 and Nike in the firing line,” said Wolf.
China can increase the regulatory burden on US companies through new inspections and rules; ban travel; stop providing export licences 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 targeting 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 that the US inquiry violated international trade rules and Beijing would defend its interests.
A US Treasury spokesperson confirmed the call, but declined to comment on the content of any letter or on a possible visit by Mnuchin to Beijing.
Chinese foreign ministry spokesperson Hua Chunying was asked at a daily press briefing about Mnuchin considering a visit and whether China was willing to invite him.
“Our door to dialogue and consultations has always been open,” said Hua.
The Trump administration has demanded that China immediately cut its staggering $375bn trade surplus with the US by $100bn.
“What we have to recognise is that China hasn’t measured up to the things we expected of them, in terms of the trade relationship,” said William Cohen, chairperson of Cohen Group, a Washington-based advisory firm.
“My hope is that they will see this is not the way to go.”