US-China trade war fears escalate as threats ramp up
Washington, US - The escalating trade confrontation between Washington and Beijing threatened to boil over on Friday after President Donald Trump lashed out again and China called on the EU to join the battle, sending global stocks into the red.
Trump remained defiant and argued the pain of the dispute will pay off in the end, while China said that his administration would only "shoot itself in the foot" if it didn't back down from the "extremely wrong" threats.
US Treasury Secretary Steven Mnuchin acknowledged there was a risk of a trade war, but said the intention is to defend US interests and the administration remains willing to negotiate. But top White House economic advisor Larry Kudlow reversed himself, and warned that the tariff threat is not a negotiating tactic.
Global stock markets were unhappy with the turn of events, as Wall Street dropped more than two per cent, following European and Asian markets lower.
In the wake of the decision to impose steep tariffs on steel and aluminium imports, the US on Tuesday published a list of US$50bn in Chinese goods to be hit by tariffs over what Washington says is widespread theft of intellectual property and technology.
China retaliated by unveiling planned levies on US$50bn worth of major US exports including soybeans, cars and small aircraft.
Trump hit back again late Thursday, instructing trade officials to consider tariffs on an additional US$100bn in imports.
"Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers," Trump said, calling Beijing's reaction "unfair."
So far, only the tariffs on steel and aluminium have taken effect, but Trump's latest threats take the dispute to a new level: China cannot retaliate in kind since it only imports US$130bn in US products, meaning it would have to find another way to respond.
Amid widespread concern, and calls for restraint from US businesses and farm states most vulnerable to Chinese retaliation, Trump said Friday the outcome would be worth the short-term risk.
"I'm not saying there's not going to be any pain," he told WABC radio in New York, but "we're going to be much stronger for it."
Speaking on CNBC, Mnuchin said Trump is not aiming to provoke a conflict with China, but he is determined to defend US interests and "there is the potential of a trade war."
However, he said the White House is willing to negotiate and is in regular contact with Chinese officials. He argued that the situation could be a "win-win" for China and the United States if Beijing opens up its economy.
"I'm cautiously optimistic to work this out," Mnuchin said, adding that "I think that we can manage this without significant difficulty to the overall economy."
China vowed to "fight back immediately and without hesitation," state media said.
"It is a battle between unilateralism and multilateralism, and between protectionism and free trade as well," said Commerce Ministry spokesman Gao Feng.
China also urged the EU to join it in taking a "clear stance" against US protectionism, calling for Brus- sels and Beijing to "jointly preserve the rules-based multilateral trade order," said Zhang Ming, the head of the Chinese mission to the EU.
The Chinese appeal came after it filed two complaints at the World Trade Organization claiming the United States has violated global trading rules, a charge the White House dismissed.
In his statement, Zhang warned that "protectionist moves under the pretext of national security will undermine the credibility of the WTO-centered multilateral trade system, and the rules-based global trade order."
Trump responded by once more dismissing the WTO as "unfair" to the United States.
He complained that the WTO considers China "a developing nation" when it is actually "a great economic power."