Info Service on Finance and Development (Oct18/01)
12 October 2018
Third World Network
Trump signals intent to intensify trade war with China
Published in SUNS #8771 dated 11 October 2018
Geneva, 10 Oct (D. Ravi Kanth) - The United States President Donald
Trump signalled on Tuesday that he will intensify the trade war with
China on grounds that Beijing is not ready to make a deal yet, and
that his administration will not go ahead with several planned meetings
Following the announcement at the White House of the resignation of
its United Nations envoy Nikki Haley on Tuesday, President Trump told
reporters that the US has cancelled several meetings with China "because
I just say they're not ready to make a deal."
He said China must come forward with several concessions to satisfy
the US demands to start the trade talks failing which he will impose
new tariffs on an additional $200 billion worth of Chinese goods.
"We can't have a one-way street [and] it's got to be a two-way
street," the US President said.
"It's been a one-way street for 25 years. We have got to make
it a two-way street. We have got to benefit also, okay?" he maintained.
Historically, the US made maximalist "our way, or the highway"
demands on its trading partners, according to several studies.
But, under Trump's escalating trade war rhetoric, it is the US which
is seeking a two-way street in trade concessions while China and other
major trading partners are resorting to one-way street demands, a
charge that cannot be substantiated with historical evidence.
Over the past few weeks, the US has ratcheted up pressure on China
on several fronts by levying unsubstantiated charges such as that
Beijing is interfering in the US congressional election, and that
China is carrying out a cyber-war among others.
"They [China] are actively trying to impact and change our election
by attacking our farmers, ranchers and industrial workers because
of their loyalty to me," Trump said over ten days ago, a charge
that was repeated by his deputy Mike Pence.
China, however, flatly denied Trump's charges as baseless.
As China stands firm against the escalating US threats, the US is
including new elements in its trade war with Beijing on the assumption
that China's economy is tottering because of the additional tariffs
imposed by the US.
The recent volatile movements of Chinese stocks and the continued
infusion of funds by the Chinese central bank into its banking system
are being interpreted as indicators that all is not well with China
following the additional tariffs imposed by the US.
On Tuesday, the chair of the Council of Economic Advisors to the US
President suggested that Beijing is starting to feel the pinch of
the US tariffs on over $250 billion of Chinese goods, according to
Washington Trade Daily (WTD) of 10 October.
Kevin Hassett, the chairman of the Council of Economic Advisors to
President Trump, warned that China "will be harmed economically
by a lingering trade war," according to the report in the WTD.
Concurring with the International Monetary Fund's assessment that
the trade war between the US and China will adversely affect global
trade, Hassett said " it's going to be harmful if China doesn't
Despite the short-term pain to the American farmers and companies,
he justified the US administration's unilateral tariff hikes on Chinese
products on grounds that the stealing of technologies and the alleged
theft of intellectual property by the Chinese companies cost a loss
of one to three percent of US Gross Domestic Product (GDP), Hassett
"Everybody hopes for an endgame where we work everything out,"
Hassett said, suggesting that there are no immediate plans for negotiations
Further, he said that the proposed reforms at the World Trade Organization
involving new disciplines on industrial subsidies and state-owned
enterprises, and on forced technology transfer are all due to "China's
unfair trade practices."
In a separate development, the US Treasury Secretary Steven Mnuchin
has raised a new front in the festering trade war with China by suggesting
that Beijing must not engage "in competitive devaluations of
Until now, the US Treasury, in its reports to the Congress, had maintained
that China did not engage in currency manipulation.
But now the US Treasury Secretary maintained that "as we look
at trade issues, there is no question that we want to make sure China
is not doing competitive devaluations."
"The renminbi has depreciated significantly during the year.
There are various factors for that which we look forward to discussing
with them," said Mnuchin, in an interview with the Financial
Times on Tuesday.
He admitted that the depreciation in the renminbi could be due to
China's economic issues following the recent developments.
"We are going to absolutely want to make sure that as part of
any trade understanding we come to that currency has to be part of
that," the US Treasury Secretary said. However, he did not explicitly
say that China is manipulating its currency.
But, as China digs its heels for a long-drawn trade war with the US,
the Trump administration is getting jittery because of the adverse
implications that it could have on American farmers following the
retaliatory measures imposed by China, the European Union, and Canada
"But Mr Trump will also have to address the impact of retaliatory
tariffs on billions of dollars worth of US agricultural exports by
China, the European Union, Canada, and Mexico, which those trading
partners levied in response to US tariffs on metals and a range of
Chinese imports. Iowa, Kansas, and Ohio were hit hard by tariffs on
port and soybeans while Kentucky's whiskey producers are facing a
25% tariff in China," according to The Wall Street Journal of
Meanwhile, it is increasingly becoming clear that the US will not
be able to succeed in pressurizing the EU as it did with Canada and
"The pressure tactics used by President Trump to revamp the North
American Free Trade Agreement won't work in trade talks with the EU,"
EU officials told The Wall Street Journal last Friday (5 October).
In short, if China remains firm against the escalating threats by
the US on one front or the other, the chances are that the Trump administration
will not be able to succeed in extracting substantial concessions
without paying commensurate and iron-clad commitments to China.