Apple, Boeing, Qualcomm would be biggest losers in a China-US trade war, state media says
People’s Daily weighs in on dispute as China’s Vice-Premier Liu He warns US Treasury Secretary Steven Mnuchin that Beijing is up for the fight
China has issued a formal warning to the United States that it is ready to defend its interests after President Donald Trump’s administration announced plans to impose tariffs on up to US$60 billion worth of Chinese imports.
Vice-Premier Liu He spoke to US Treasury Secretary Steven Mnuchin over the phone on Saturday, in what was the first high-level contact between the two governments since the White House revealed its proposal on Thursday.
Also on Saturday, China’s official People’s Daily issued a warning of its own, suggesting that several American companies, including Apple, Boeing, Intel, Qualcomm and Texas Instruments, would be among the biggest losers in the event of a trade war.
Liu, whose status as a vice-premier was confirmed at the National People’s Congress last week, has responsibility for the country’s economic and financial issues, and leads China’s trade negotiations with the US.
During their telephone conversation, Liu told Mnuchin that the US investigation into China’s alleged breaches of intellectual property rights went against international trade rules and would not benefit the US, China or the rest of the world, the Xinhua report said.
“China is prepared to defend its national interests,” he said. “We hope both sides will be rational and work hard to maintain the stability of the overall China-US trade relationship.”
Liu and his team travelled to the US last month in an effort to derail a possible trade war. After the telephone conversation on Saturday, the two sides agreed to maintain communications on the issue, Xinhua said.
Trump said on Thursday that the tariffs, announced after a six-month investigation under Section 301 of the Trade Act of 1974, were aimed at what he called Beijing’s economic aggression. A list of the products that will be subject to tariff increases will be published within 15 days of the initial announcement.
It is expected that the list will include products covered by the Made in China 2025 plan, Beijing’s strategy to make the country more self-sufficient in a range of technologies, including new-energy vehicles, aerospace, aviation and maritime engineering equipment, robotics and cloud computing.
As well as the tariffs, Trump has also instructed Mnuchin to propose new investment restrictions on Chinese companies within 60 days.
Speaking at the China Development Forum in Beijing on Saturday, former Chinese Finance Minister Lou Jiwei said that as well as the retaliatory measures already announced – the Ministry of Commerce said on Friday that China would impose 15 per cent import tariffs on 120 types of US products, including fruit, wine and steel pipes, worth US$977 million – Beijing should target US exports of soybeans, cars and aircraft.
“I think China’s response measures so far have been rather weak,” the head of the National Council for Social Security Fund said. “If I were in the government, I would first hit soybeans, then cars, and then planes.”
Wei Jianguo, a former vice-minister of commerce, said China was in fact in the process of drafting lists of US products – including planes and microchips – that would be subject to a second and third round of tariffs.
Depending on the actions of the United States, other industries, such as tourism, might also be affected, he said, without elaborating.
Meanwhile, a commentary in People’s Daily on Saturday suggested that a trade war between China and the US would hurt Trump’s prospects of re-election in 2020.
“China is currently the top three export market for 33 states in the US, and the top five market for another 13,” it said. “If the US starts a trade war to limit China’s goods and investment, 425 of the 535 seats of the Electoral College that have received investment from China would use their votes to express their opinion after their interests were harmed.”
China is the biggest buyer of American soybeans and planes, and the second biggest for cars, microchips and cotton, the commentary said.
Many major American companies would suffer in the event of a trade war, it said, adding that China accounted for 20 per cent of Apple’s revenue in the fourth quarter of 2017, and 13 per cent of Boeing’s total sales for the year. Intel, Qualcomm, Texas Instruments and Micron Technology would also be hard hit, it said.
Also speaking at the China Development Forum, Apple Chief Executive Tim Cook said he hoped “calm heads” would prevail in the dispute.
The People’s Daily article said also that the plunge in the US stock market showed that a trade war was a threat to the United States’ economic recovery and financial markets, and would damage Trump’s election pledge to make America great again.
A senior US official, who spoke on condition of anonymity, said the tariff plans were also designed to counter the threat of China emerging as a major technological competitor.
Wang Yiwei, a professor of International Studies at Renmin University of China in Beijing, said the latest move by Washington was not only about the trade gap between the two countries, but also an indication of their growing strategic rivalry.
“The US has ulterior motives in starting the trade war, as it is part of the two countries’ strategic competition,” he said. “The US cannot tolerate China challenging its dominance.”
When outlining his new national security strategy in December, Trump labelled China and Russia the primary threats to US economic dominance.
He Weiwen, a senior fellow at the Centre for China and Globalisation, said that despite the heated exchanges, China was likely to offer concessions to the US by opening up some sectors such as finance and hi-tech.
“A better outcome [than a trade war] would be for China to further open up its markets,” the former economic and commercial councillor at China’s consulate generals in San Francisco and New York. “China has already promised to ease the limit on foreign ownership of banks and securities firms over the next three years.”
If things did not go so well, and the US imposed greater restrictions on Chinese investment and access to its latest technology, China’s industrial upgrading programme could stall, He said.
Amid all the talk of a trade war, US Secretary of Commerce Wilbur Ross was quoted by Bloomberg as saying on Thursday that one way for Beijing to reduce its US$375 billion trade surplus would be to buy more American natural gas.
“China needs to import very, very large amounts of LNG and from their point it would be very logical to import more of it from us, if for no reason other than to diversify their sources of supply,” Ross said. “It would also have the side effect of reducing the deficit.”
China’s Ministry of Commerce could not be reached for comment on Saturday.
As well as the planned tariffs on Chinese imports, the Office of the US Trade Representative has also taken its dispute with China over what it claims are discriminatory licensing practices on US technology to the World Trade Organisation. China’s commerce ministry said it regretted the move.
WTO spokesman Fernando Puchol said on Friday that the trade body would make a “detailed analysis” of the request.
“We are monitoring the situation, which at this moment is still very fluid. Many things are happening in a short space of time,” he was quoted by Reuters as saying in a briefing to the United Nations.