U.S., China standing firm on trade

WASHINGTON — The trade clash between President Donald Trump and China’s government is escalating, with Beijing pledging to “counterattack with great strength” if Trump follows through on threats to impose tariffs on an additional $100 billion in Chinese goods.

On Saturday, Trump tweeted: “The United States hasn’t had a Trade Surplus with China in 40 years. They must end unfair trade, take down barriers and charge only Reciprocal Tariffs. The U.S. is losing $500 Billion a year, and has been losing Billions of Dollars for decades. Cannot continue!”

In Beijing, a Commerce Ministry spokesman said Friday that China doesn’t want a trade war — but isn’t afraid to fight one.

“If the U.S. side announces the list of products for $100 billion in tariffs, the Chinese side has fully prepared and will without hesitation counterattack with great strength,” spokesman Gao Feng said. He gave no indication what measures Beijing might take.

Trump called for the new measures after China threatened to retaliate for the first round of tariffs planned by the United States. But Trump left it unclear whether he was bluffing or was willing to risk a long trade dispute between the world’s two biggest economies, with steep consequences for consumers, businesses and an already shaken stock market.

The U.S. bought more than $500 billion in goods from China last year and now is planning or considering penalties on some $150 billion of those imports. The U.S. sold about $130 billion in goods to China in 2017 and faces a significant hit to its market there

if China responds in kind.

Global financial markets have fallen sharply as China and the U.S. square off — the Dow Jones industrial average sank 572 points Friday.

Trump told advisers Thursday that he was unhappy with China’s decision to tax $50 billion in American products, including soybeans and small aircraft, in response to the U.S. move last week to impose tariffs on $50 billion in Chinese goods.

Rather than waiting weeks for the U.S. tariffs to be implemented, Trump backed a plan by Robert Lighthizer, his trade representative, and was encouraged by Peter Navarro, a top White House trade adviser, to seek the enhanced tariffs.

China said negotiations were impossible under the circumstances. But Trump officials said the president and his team remained in contact with President Xi Jinping and expressed hope to him of resolving the dispute through talks.

“They aren’t going to bully [Trump] into backing down,” said Stephen Moore, a former Trump campaign adviser who is now a visiting fellow at the Heritage Foundation. He said the Chinese “are going to have to make concessions — period.”

EU WEIGHS IN

Meanwhile, European Commission Vice Presidents Jyrki Katainen and Valdis Dombrovskis said the European Union can help settle the burgeoning trade dispute.

Rather than participate in the dispute, the EU can leverage its role as the world’s largest market to uphold the rules of international trade and push back against unilateral tariffs like the ones backed by Trump, the two officials said Saturday.

The EU “is trying to settle down or stabilize the current situation,” said Katainen, the bloc’s commissioner in charge of jobs and growth, stressing that there should be cooperation with both the U.S. and China.

His colleague Dombrovskis, the commissioner in charge of the euro, said the EU’s role is not about “taking sides” but about respecting rules. “If there are trade disputes, and there are always trade disputes, solve them within the World Trade Organization,” he said.

European leaders are stepping up efforts to avert a fullblown trade war between the world’s two largest economies. German Chancellor Angela Merkel and French President Emmanuel Macron will both travel to Washington this month for talks with Trump, ahead of a May 1 decision on whether Europe will continue to be exempted from U.S. steel and aluminum tariffs.

“It’s a cause for concern,” Dombrovskis said. “There shouldn’t be unilateral measures taken by countries.”

But even as the bloc works to avoid any disruption in U.S.-EU commerce, officials are concerned about the future of other multilateral free-trade agreements that are being threatened by Trump’s trade policies.

Still, the EU commissioners conceded that there are some real issues that need to be addressed, such as China’s overcapacity in steel production as well as concerns about the defense of intellectual-property rights and data protection.

“It’s very right what Trump has said that the basic principle of trade should be reciprocity,” Katainen said. “So we expect reciprocity from China, though we understand that it doesn’t happen overnight.”

The White House sent mixed signals Friday as financial markets slid because of investor concern about a significant trade fight.

Treasury Secretary Steven Mnuchin told CNBC that he was “cautiously optimistic” that the U.S. and China could reach an agreement before any tariffs go into place. But, he added, “there is the potential of a trade war.”

White House economic adviser Larry Kudlow told reporters the U.S. was “not in a trade war,” adding: “China is the problem. Blame China, not Trump.”

With farmers angry and worried as China vows to retaliate, many Republicans find themselves torn between loyalty to a president who remains broadly popular in rural states and the demands of constituents, especially farmers, to oppose his tariffs.

EFFECT ON FARMERS

For Trump, the dispute runs the risk of blunting the economic benefits of his tax overhaul, which is at the center of congressional Republicans’ case for voters to keep them in power after the 2018 elections.

Trump also faces a potential rebellion from farmers and other agricultural producers who could suffer devastating losses in a trade war.

With farmers angry and worried as China vows to retaliate, many Republicans find themselves torn between loyalty to a president who remains broadly popular in rural states and the demands of constituents, especially farmers, to oppose his tariffs.

In North Dakota, a major soybean-producing state, Rep. Kevin Cramer, a Republican who is running for the Senate, urged Trump to “take a more measured approach” to China. On Friday, he called for the Agriculture Department to protect farmers.

“I contacted @SecretarySonny to urge him to use every tool in the Farm Bill, including Commodity Credit Corp programs, to protect ag producers from effects resulting in potential trade actions against China,” he wrote on Twitter, referring to Agriculture Secretary Sonny Perdue. “Farmers must know the Admin has their back & I urge them to act swiftly.”

China’s aggressive response to Trump’s tariffs is aimed squarely at products produced in the American heartland, a region that helped send Trump to the White House. A trade war with China could be particularly devastating to rural economies, especially for pig farmers and soybean and corn growers. Nearly two-thirds of U.S. soybean exports go to China.

Trump has directed the Agriculture Department to implement a plan to help farmers cope with the damage from tariffs. But few details have been forthcoming about how such a program would work or how much it might cost. And it is not clear how much the department could do to remedy the damage done to key trading relations in a global economy.

Trump has also pushed for a crackdown on China’s theft of U.S. intellectual property, and he criticized the World Trade Organization, an arbiter of trade disputes, in a tweet Friday for allegedly favoring China. Trump asserted the organization gives the Asian superpower “tremendous perks and advantages, especially over the U.S.”

U.S. officials have downplayed the threat of a broader trade dispute, saying a negotiated outcome is still possible. But economists warn that the tit for tat bears the hallmarks of a classic trade rift that could keep growing. Worry is intensifying among Republicans, who traditionally have favored liberalized trade.

“The administration needs to be thinking about the unintended consequences and what are those ripple effects, those domino effects, and what are the retaliatory actions that are likely to be taken,” said South Dakota Sen. John Thune, the Senate’s No. 3 Republican, in an interview with KDLT-TV in Sioux Falls.

The standoff began last month when the U.S. imposed tariffs on imported steel and aluminum. China countered by announcing penalties on $3 billion worth of U.S. products. The next day, the United States proposed the $50 billion in duties on Chinese imports. Beijing responded within hours with a threat of further tariffs of its own.

Further escalation could be in the offing. The U.S. Treasury is working on plans to restrict Chinese technology investments in the United States. And there’s talk that the U.S. could put limits on visas for Chinese citizens who want to visit or study in the U.S.

Kudlow told reporters that the U.S. may provide a list of suggestions to China “as to what we would like to have come out of this,” and those issues were under discussion.

“Negotiations are better than tariffs,” Kudlow said. “A solution in the next three months would be better than anything. I think that’s eminently do-able.” He added: “But Trump is not just using tariffs as a negotiating card. He said that to me.”