China is said to cancel trade talks as new US tariffs loom

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Containers sit stacked next to gantry cranes at the Yangshan Deep Water Port in Shanghai, China. (Bloomberg pic)

BEIJING: China has scrapped planned trade talks with the US and is unlikely to sit down with Washington until after November’s mid-term elections, according to people familiar with the situation.

The decision to call off a planned delegation next week comes as President Donald Trump signals he’s prepared for short-term pain for the US economy by ramping up the trade war, in the pursuit of what he sees as the long-term gains from taking on China.

The White House had no immediate response to China’s latest move. Yet hours before the Wall Street Journal first reported that Beijing had scrapped plans to send Vice-Premier Liu He and a mid-level delegation to Washington, a senior US official told reporters that the president believes inaction on China will ultimately leave the economy and consumers worse off.

In addition to new tariffs on US$200 billion of Chinese goods set to go into effect Sept 24, the US State Department sanctions against China’s defence agency and its director on Thursday contributed to the ultimate decision to cancel the talks, the people said.

The Long Run

“It would be ‘asking for an insult,’ if China went ahead with trade talks after the US announced new tariffs and sanctions,” Shi Yinhong, a professor of international relations at Renmin University of China, said Saturday. “In the long run, there will be talks, because the trade war won’t last for thousands of years.”

In his push for what he calls a level playing field in dealing with China, Trump slapped the new tariffs on imports from China and threatened more if Beijing retaliated. On Aug 18, China said it would impose levies on US$60 billion worth of US goods effective Sept 24.

The new tariffs brought “new uncertainties” to China-US negotiations, Gao Feng, a spokesman for China’s Ministry of Commerce said, when answering a question at a press conference on Thursday on whether the countries would have a new round of trade talks. He used exactly the same wording the ministry used in an earlier statement.

Companies Worried

The Ministry of Commerce and the Ministry of Finance didn’t respond to faxes inquiring about the matter on Saturday.

US industry has widely pushed back against the Trump administration’s use of tariffs to force changes to China’s economy, and companies from Walmart Inc. to Gap Inc. and Samsonite International SA have said they’re prepared to raise prices if the new tariffs bite into their business.

Trump’s biggest strike yet in a growing trade fight between the world’s biggest economies will see a 10% duty applied to US$200 billion of Chinese imports, which may rise to 25% in 2019. He’s threatened duties on a further US$267 billion of made-in-China goods, which would hit almost all other consumer products including mobile phones, shoes and clothes.

The latest round of duties comes on top of a 25% tariff already imposed on about US$50 billion in Chinese goods, which spurred counter-tariffs from Beijing.

Trump’s Stand

Trump continued to hit out at China late this week, signalling the trade war won’t end any time soon. “It’s time to take a stand on China,” he said in an interview Thursday with Fox News. “We have no choice. It’s been a long time. They’re hurting us.”

“The new US tariffs on Chinese goods, mostly consumer-oriented, will depress spending and hurt the retail sector beginning in 2019,” Seema Shah and Danielle McIntee, analysts with Bloomberg Intelligence, wrote in a note on Friday. “Lower-income families, already pinching pennies, are most exposed, given the likelihood of tariff-related price increases on everyday items.”

Commerce Secretary Wilbur Ross earlier this week said the tariffs are spread over such a wide range of goods that Americans shouldn’t notice price increases.

“We were trying to do things that were least intrusive on the consumer,” Ross said on CNBC on Tuesday. “We really went item-by-item trying to figure out what would accomplish the punitive purpose on China and yet with the least disruption in the US.”

2018-09-22 09:18:00

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