China-US relations

China, US have first trade row after eye-popping US$253 billion deals

Dispute sparked by anti-dumping duties intensifies just days after Donald Trump and Xi Jinping oversaw the signing of US$253 billion in trade deals

PUBLISHED : Wednesday, 15 November, 2017, 9:00am
UPDATED : Wednesday, 15 November, 2017, 10:15am

Beijing hit back at Washington over its decision to impose anti-dumping duties on Chinese plywood products, as a high-profile trade row intensified just days after US President Donald Trump and President Xi Jinping oversaw the signing of US$253 billion in trade deals.

The dispute over plywood panels used widely in furniture and interior decoration took place before Trump concluded his Asia trip. The tensions suggested that trade relations between the world’s two major economies will remain bumpy, despite Beijing’s efforts to gloss over the differences during Trump’s maiden presidential visit in China last week by agreeing to the package of deals.

The US Commerce Department said on Monday that it found China was providing subsidies of up to 195 per cent of product value and would impose tariffs at corresponding rates. In response, China’s Ministry of Commerce said in a brief statement on Tuesday that the US method of calculating Chinese cost discriminated against China and violated World Trade Organisation rules. China said it felt deep “dissatisfaction” over the case.

While the value of Chinese exports of plywood was merely US$1.1 billion last year, or about 0.25 per cent of total Chinese cargo shipments to the US, the dispute touched on a thorny issue in the countries’ relations: China asked the US to treat it as a market economy but the US refused to do so.

Trump avoided directly criticising China over trade during his 12-day Asian trip. While he said he did not “blame China” for the US’ trade deficit, he demanded fair trade from Asian countries.

As Trump headed home from Manila on Tuesday he tweeted that “after my tour of Asia, all Countries dealing with us on TRADE know that the rules have changed”.

“The United States has to be treated fairly and in a reciprocal fashion,” the US president said. “The massive TRADE deficits must go down quickly!”

Huo Jianguo, a former head of the Commerce Ministry’s research institute, said it was “unrealistic” to expect US-China trade disputes to disappear in the near term.

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“While the two leaders held good talks, trade friction is a chronic issue,” Huo said.

“Trade is a complicated issue where the two countries have substantial disagreements. It is too optimistic to [believe] that Sino-US relations have entered into a new era and every problem will be solved,” he said.

Since last year’s election campaign, Trump has blamed Beijing for the huge US trade deficit which stood at US$347 billion last year, the largest in the world. Washington, which has failed to make much headway in narrowing the trade deficit with Beijing, has a long list of grievances about China on trade, including claims that it is dumping inexpensive steel onto the US market and stealing US intellectual property.

Xu Zheng, a lawyer at the Beijing-based law firm of Jincheng Tongda & Neal, said the US’s International Trade Commission is likely to determine that China’s exports had a material impact on American domestic industry when the ITC’s final ruling is issued early next month.

“Currently the US imposes no tariff on some plywood products and an eight per cent tariff on others,” Xu said. “It would be a huge blow to mainland exporters if anti-dumping and countervailing duties were levied.”

Brock Silvers, managing director at Kaiyuan Capital in Shanghai, said: “Trump is likely to be much tougher on China trade issues than previous presidents, and trade should continue to be a contentious issue in the near-term.”

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“As long as larger relationship issues remain relatively calm, I’d look for an eventual deal with greater Chinese concessions than we’ve seen to date,” Silvers said.

Mei Xinyu, a researcher at a Ministry of Commerce think tank, said Trump had effectively abandoned the US’s long-standing approach of changing China through “peaceful evolution”. The strategy had laid a good foundation for the Sino-US relationship under which small frictions would be tolerated by the China side, the researcher said.