China to Respond If US Provokes Escalation of Trade War - Foreign Ministry

Aaron Brown
August 4, 2018

Trade tensions between the USA and China have been escalating for months, driven by President Trump's aggressive rhetoric and policy positions.

But Beijing appears, instead, to be digging in with more retaliatory measures that experts believe could hurt the economies of both countries. As such, Brussels seems to have buckled under Washington's pressure, and in the future the two sides could cite common concerns to jointly seek to reform WTO rules. So far, the strong economy and robust corporate earnings have been enough for the market to withstand a protectionist onslaught.

Chinese equities and the yuan extended losses yesterday afternoon, gaining downward momentum as concern over possible higher United States tariffs overwhelmed optimism about Beijing's pledge to support economic growth.

China appears to have stripped back its imports of US crude oil to near zero for September, having taken about 333,000 barrels per day in the first six months of the year, according to vessel-tracking data.

"We hope that those directly involved in the United States' trade policies can calm down, carefully listen to the voices of USA consumers. and hear the collective call of the global community", Wang Yi, the Chinese government's top diplomat and a member of the country's state council, or cabinet, said in Singapore.

The dynamic has proved hard to change, given US consumers' reliance on Chinese goods.

"The president is going to continue to hold China responsible for their unfair trade practices", said White House press secretary Sarah Huckabee Sanders.

There are signs that his approach is not working the way he intended.

The US trade deficit recorded its biggest increase in more than 1-1/2 years in June as the boost to exports from soybean shipments faded and higher oil prices lifted the import bill. "Importers may have ordered aggressively in June ahead of tariffs imposed this month by the USA and China", the port stated in a press release.

The odd thing is that crude oil and LNG aren't subject to any formal trade tariffs, and they appear most affected, while steel, which is the target of USA tariffs, is performing strongly. And U.S. auto imports are under separate threat.

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Trump is facing increased domestic backlash for starting and escalating a trade war with China.

And it is not clear whether normal diplomatic channels are working, either. But White House officials said formal talks between the countries have mostly lapsed as the economic restrictions have hardened.

While a trade dispute is obviously not comparable to a shooting war, the current U.S.

Despite last week's apparent cooling off of the trade tensions between the U.S. and Europe following Trump's meeting with the European Commission's Jean-Claude Juncker, the European Union clearly doesn't believe the agreement to work towards lower tariff barriers will hold.

"The trade war is a tactic by Trump, but if it eventually evolves into a strategic confrontation, the result will undoubtedly be disastrous", he said.

China promptly promised it would take countermeasures of its own.

Last month, Trump threatened to impose tariffs on all goods imported from China.

Trump initially proposed 10 per cent tariffs on an additional $200 billion of Chinese imports, but he told trade officials this week to consider raising that to 25 per cent.

The trade battle has business leaders on both sides anxious about where this will end up.

"Each tariff escalation leads to further retaliatory action from China - ultimately inflicting even more harm on American businesses, workers, farmers, ranchers, and consumers". It's a "race to the bottom that will harm American consumers, farmers and US industry".

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