Photo: AP Photo
Photo: AP Photo
May 06, 2019 02:55 PM
President Donald Trump's threat to escalate tariffs on Chinese goods has clouded prospects for a trade agreement, though preparations by Beijing's envoys to visit Washington this week buoyed hopes for a breakthrough to end the trade war between the world's two largest economies.
Beijing is "trying to get more information" after Trump's announcement over the weekend that he would raise tariffs on $200 billion of Chinese imports from 10% to 25% on Friday, said Foreign Ministry spokesman Geng Shuang. Trump's threat was seen as an effort to intensify pressure on Beijing to agree to a deal that would be to Trump's liking.
Stock markets initially plunged Monday after Trump's Sunday tweet over fears that China would abandon the latest round of talks, which are scheduled to resume Wednesday in Washington. U.S. stocks later regained some of their lost ground on hopes that the negotiations would proceed.
Geng offered no details on when exactly the talks would resume or who would join the Chinese delegation. He would not say whether Vice Premier Liu He, who has led China negotiators in previous rounds, will travel to Washington.
The lack of details suggested that Beijing is wrestling with an internal conflict: It is eager to end a high-stakes trade fight that has battered Chinese exporters yet reluctant to appear to bow to the Trump administration's demands for far-reaching concessions.
Trump's threat makes going ahead with talks "very difficult politically" for President Xi Jinping's government, said Jake Parker, vice president of the U.S.-China Business Council. He said the Chinese public might "view this as a capitulation" if Beijing reached an agreement before Trump's Friday deadline.
If Trump carries out his threat, American companies in China "would be very concerned" about official retaliation, Parker said.
Geng said he hoped the two powers could "meet each other halfway so we make a mutually beneficial agreement on the basis of win-win and mutual respect."
The two governments have raised tariffs on hundreds of billions of dollars of goods in their dispute, which centers on the administration's complaints about China's efforts to achieve supremacy in global technology through illicit means. The confrontation has disrupted trade in goods ranging from soybeans to medical equipment.
Trump's threats to increase import taxes on $200 billion of Chinese products and impose tariffs on $325 billion of additional imports would in effect cover everything Beijing ships to the United States. That raised the stakes. His administration has already imposed 25% tariffs on $50 billion of Chinese imports, while Beijing has imposed penalties on $110 billion of American goods.
On Monday morning, Trump stepped up his pressure, tweeting: "The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we're not going to be doing that anymore!"
During Asian stock trading, China's main stock index plunged 5.6 percent and Hong Kong lost 2.9 percent. Market benchmarks in France and Germany sank 2 percent. On Wall Street, the Dow Jones Industrial Average was down around 240 points, or 0.9%, in early afternoon trading. It had been down as much as 471 in the first few minutes of trading.
Previously, Trump had postponed deadlines for a trade agreement in an effort to buy more time for negotiations. But on Sunday, he complained on Twitter that a deal with Beijing was coming "too slowly, as they attempt to renegotiate. No!"
The suddenly combative rhetoric from Trump came as a surprise. For weeks, administration officials have been suggesting that negotiations were making steady progress.
Michael Pillsbury, director of the Hudson Institute's Center on Chinese Strategy and an adviser to the Trump White House, said the president's tweets suggest that Chinese leaders "are trying to take back concessions they already made."
Trump raised tariffs on Chinese imports on July 6 in response to complaints that Beijing steals or pressures foreign companies to hand over technology. The administration and other trading partners also want Beijing to scale back plans for government-led creation of Chinese global competitors in robotics and other technology. They say those violate the communist government's market-opening commitments.
Both sides say they are making progress, but no details have been released. Beijing's negotiators have agreed to narrow the politically sensitive Chinese trade surplus with the United States by purchasing more soybeans, natural gas and other goods. They have offered to change industrial strategies but have ruled out discarding them outright.
Another sticking point is U.S. insistence on an enforcement mechanism with penalties in the event Beijing fails to stick to any commitments it makes.
Economists suggested Trump may want to step up pressure because China's economy is improving, reducing the urgency for Beijing to strike a deal.
The latest quarter's growth held steady despite a slump in exports to the United States. That suggested official efforts to reverse a downturn were gaining traction.
"China may have appeared less willing to offer additional concessions," Citigroup economists said in a report.
A Chinese decision to pull out of talks could have global repercussions, causing turmoil in financial markets and dragging on economic growth, economists said.
"The risk of an all-out U.S.-China trade war has increased significantly," Tao Wang and Ning Zhang of UBS said in a report.
Created: May 06, 2019 02:55 PM
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