U.S. still open to talks with China amid fears of trade war

The Trump administration indicated it is willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the U.S. economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the U.S. isn’t entering “World War III” and left the door open for a negotiated solution.

“Even shooting wars end with negotiations,” Ross said.

Earlier Wednesday, China said it would levy an additional 25 percent levy on about $50 billion of U.S. imports including soybeans, automobiles, chemicals and aircraft. The move matched the scale of proposed U.S. tariffs announced the previous day. The U.S. is allowing 60 days for public feedback and hasn’t specified when the tariffs would take effect, leaving a window open for talks.

U.S. stocks opened sharply lower, but recovered as investors speculated that the flurry of tariffs may not do much damage to the global economy.

President Donald Trump also downplayed the prospect of a trade war, saying on Twitter on Wednesday morning that “we are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.”

Trump later tweeted that “when you’re already $500 Billion DOWN, you can’t lose,” in a possible reference to America’s trade deficit with China. Figures from the U.S. Commerce Department put last year’s trade gap with the Asian nation at $337 billion.

The Trump administration is urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve a rise in trade tensions, a person familiar with the matter said earlier this month.

Investors are weighing the risks of a trade war, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. The U.S. is targeting high-tech sectors that Beijing sees as the future for its economy.

While the China retaliation was more belligerent than expected, Beijing probably wants to de-escalate tensions by underscoring what’s at stake for both sides, Oxford Economics director of global macro strategy Gaurav Saroliya said in a research note. “Negotiations will probably lead to less disruptive outcomes for both sides,” Saroliya wrote.

In a statement following the U.S. release of details on its China tariffs, Treasury Secretary Steven Mnuchin said the administration “will continue to engage in discussions with China to address these issues of reciprocal trade.”

Beijing’s proposed targets strike at the core of commercial relations between the two countries, and at some of the most politically sensitive goods in core Trump constituencies. For example, China is the world’s largest soybean importer and biggest buyer of U.S. soybeans in trade worth about $14 billion last year. Farming states were also among Trump’s staunchest supports in the election.

Industries including aerospace, information and communications technology, robotics and machinery were among those targeted by the U.S. Trade Representative on Tuesday.