TWN Info Service on WTO and Trade Issues (Oct18/09)
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 with China.

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 reform."

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 said.

"Everybody hopes for an endgame where we work everything out," Hassett said, suggesting that there are no immediate plans for negotiations with China.

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 the renminbi".

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 among others.

"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 10 October.

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 Mexico.

"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.