Trading punches

EVEN after Vice-Premier Liu He spoke by phone with the US Treasury secretary on Saturday, calling for concerted efforts to maintain the stability of trade ties between their respective countries, the Trump administration has made it clear it intends to squeeze as much as it can from China.

Having already slapped hefty tariffs on steel and aluminium imports from China and threatening to impose tariffs on a list of other Chinese products under Section 301 of the Trade Act of 1974, the United States reportedly urged China in a letter last week to cut the tariffs on US automobiles, buy more US semiconductors and give US companies greater access to the Chinese financial sector.

By forcing China to open up its market to US companies in this way, the Trump administration will be hoping to narrow the bilateral trade deficit and create domestic jobs, as well as boosting its support ahead of the mid-term elections in November.

But what is dangerous is that the Trump administration seems to be determined to get concessions from China, no matter how or what the consequences. US Treasury Secretary Steven Mnuchin said he is “cautiously hopeful” the two sides will ultimately reach an agreement, and China’s Ministry of Foreign Affairs said on Monday “the door of dialogue is always open”.

Mnuchin is reportedly weighing up a trip to China for talks, and that should be encouraged. However, the possibility of an escalating trade war cannot be excluded, as China will not be bullied.