US official: trade war with China is not personal, it is just business

Tariffs should be seen in economic context and not tied to disagreement between two nations on denuclearisation of North Korea

PUBLISHED : Saturday, 21 July, 2018, 1:30am
UPDATED : Saturday, 21 July, 2018, 2:15am

The United States’ aggressive stance in its trade war with China should be viewed in a purely economic context and not as part of a wider, politically driven approach, an American official familiar with the situation said on Friday.

Speaking on condition of anonymity, the official said Washington was not trying to contain China, and its biggest concern was that President Xi Jinping’s administration would “misread” its message.

The trade war was separate from the disagreements between the two countries over the denuclearisation of North Korea, the official insisted, even as US President Donald Trump threatened to slap tariffs on another US$500 billion worth of Chinese products. He imposed them on US$250 billion worth earlier this month.

The official defended the policy as being aimed at forcing China to speed up the pace with which it opened up its market to foreign investors, a promise Beijing made when it joined the World Trade Organisation (WTO).

“The US does not mean to contain China,” the official said. “It wants the country to speed up the process of opening up its market.”

China does not see it that way, and has denounced the tariffs as trade bullying and protectionism.

For the Trump administration, a key concern is that China is hoping for Washington to relax its stance after the midterm elections in November, when the Democrats may be able to wrestle control of Congress or the Senate from the Republican Party.

“It is not a good idea to assume that Trump is not going to do it when he says he is going to do it,” the official said, adding that it would be wrong for China to assume “some magic will happen and there will be no more [trade tariffs] in November if there is a change in the midterm elections in the Senate”.

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The first shots of the trade war were fired on July 6 when a 25 per cent tariff levied on US$34 billion worth of Chinese goods took effect, which prompted Beijing to react with tit-for-tat tariffs on American goods imported to China. On July 10, Trump threatened to impose another 10 per cent duty on US$200 billion worth of Chinese products.

The US official said China should have reacted to the tariffs with a package of reforms to be implemented over the next few years. Beijing’s decision to retaliate, he said, “reinforced the idea this is man-to-man sumo wrestling”.

The impact on Hong Kong, and its “transparent, clear, fair and international economy”, was not intended, the official said, but was an inevitable result of the trade war.

He disagreed with Hong Kong Commerce and Economic Development secretary Edward Yau Tang-wah’s description that Trump’s decision not to seek a settlement through the WTO was similar to “a captain getting ready to abandon ship”.

“We are on the same boat, and are the biggest WTO member,” the official said. “The Hong Kong government doesn’t like us to go outside the WTO, but we feel it is a must.”

While Trump had indicated his desire to pull the US out of the WTO during his election campaign, the official said the US had no intention of quitting the trade body.

He did, however, question how the US, the biggest importer in the world, could be accused of adopting protectionist strategies.

In a Legislative Council panel meeting on Friday, Financial Secretary Paul Chan Mo-po estimated that 49 per cent of Chinese exports shipped via Hong Kong to the US were subject to the two rounds of tariffs that Washington had imposed on Chinese products. This accounted for 3.5 per cent of the city’s total exports.

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“The impact on Hong Kong’s economy would start to emerge at the end of this year or at the beginning of next year,” Chan said.

Also at the panel, the commerce minister said the WTO had dismissed Hong Kong’s complaint about the US tariffs as a third party, which meant the government would pursue direct negotiations with Washington through the trade body.