China accuses US of igniting trade war with tariffs but there could be more talks ahead

Analysts say Beijing hasn’t given up possibility of further negotiations in the next three weeks before duties announced by both sides take effect

PUBLISHED : Saturday, 16 June, 2018, 10:04pm
UPDATED : Saturday, 16 June, 2018, 11:31pm

China has accused the United States of igniting a trade war by imposing tariffs on its products and forcing it to fight back, but analysts say the world’s two largest economies could still return to the negotiating table before the duties kick in.

The White House pressed ahead with punitive tariffs on US$50 billion of Chinese products on Friday, targeting China’s fledgling hi-tech industries.

Beijing struck back within hours, slapping the same amount of tariffs on 659 American imports – from agriculture and seafood to cars and energy products.

“It is deeply regrettable that, disregarding the consensus between the two sides, the US has flip-flopped and ignited a trade war,” foreign ministry spokesman Lu Kang said late on Friday.

Chiding the US move as “a short-sighted act” that hurts both the US and others, Lu said China “had no choice but to fight back forcefully”.

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But Chinese analysts said Beijing had not given up on the possibility of more negotiations in the next three weeks before both sides’ tariffs take effect.

John Gong, an economics professor at the University of International Business and Economics in Beijing, said the latest turn of events was only a “prelude”.

“Things are still in flux before July 6,” he said, referring to the date when the first wave of tariffs will begin. “There has been plenty of back and forth before – the track record is there. I think they will be talking again soon,” he said.

China has retaliated against the tariffs in two stages, calibrated with the steps being taken by the US. The first wave of tariffs is scheduled for July 6, covering US$34 billion of American goods that range from beef, poultry and seafood to soybeans and cars. A date for the second round of tariffs – on chemicals, medical equipment and energy products such as coal and crude oil – will be announced later.

Earlier on Friday, US President Donald Trump said Washington would respond with more tariffs if China retaliated. He has already threatened additional tariffs on US$100 billion of Chinese imports, but the list of products has not been finalised.

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The escalation came after months of trade talks between Beijing and Washington. When US Commerce Secretary Wilbur Ross visited Beijing for the latest round of negotiations earlier this month, China offered to buy US$70 billion worth of American agricultural and energy products on the condition that the threatened tariffs be dropped, but the offer apparently failed to impress the Trump administration.

Washington’s refusal to back down has invited some tough language from Chinese state media. The ruling Communist Party’s main mouthpiece People’s Daily lashed out at the US for disregarding their bilateral consensus with its “obdurate” act.

“Since provoking the trade dispute, capricious actions have become the norm for the US. Not only have they damaged their reputation and credibility, but they’ve also let China see how rude, unreasonable, selfish and impulsive the Trump administration is,” the newspaper said in an editorial on Saturday.

While analysts did not rule out the possibility of more talks, they also warned there could be another flare-up in tensions later this month, when the White House releases its proposal for restrictions on Chinese investment and export controls on “industrially significant technology” on June 30.

Those restrictions are aimed at stopping China from developing its own hi-tech industry with technologies acquired from the US – one of Washington’s long-standing complaints.

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“The US is waging a war on trade on one hand, and a war on investment on the other,” said Wang Yong, a professor of international studies at Peking University. “This shows how serious the situation has become: rivalry over the economy and technology between China and the US has arrived earlier [than expected], and tensions are running high.”

But Gong from UIBE said even if the tariffs went into force, they could be called off a few months into a trade war when they started to bite.

Wang agreed that talks would continue between Beijing and Washington.

“The industries targeted by China’s retaliatory tariffs, such as agriculture, cars and energy, will exert more pressure on Trump. In addition, sudden developments on international issues such as North Korea could prompt the US to seek help from China. There must be more talks to come,” he said.

Derek Scissors, a China expert at the American Enterprise Institute, a Washington-based think tank, expected the July 6 tariffs to go ahead, though the two sides could still negotiate on the second round.

“I believe the initial tariffs will go into effect July 6. However, the second set of tariffs allows time for negotiations, which could lead to the initial tariffs being lifted after only a few months,” he said.

But others were less optimistic.

“The question that no one can answer right now is whether Trump will then escalate into a full-blown trade war,” said David Dollar, a China expert at the Brookings Institution, a Washington-based think tank. “It is hard to see either side backing down in the near future.”

Additional reporting by Robert Delaney