Economy China says ready to defend its interests in U.S. trade spat

China says ready to defend its interests in U.S. trade spat

Image result for U.S. Treasury Secretary Steven Mnuchin
U.S. Treasury Secretary Steven Mnuchin

The United States has flouted trade rules with an inquiry into intellectual property and China will defend its interests, Vice Premier Liu He told U.S. Treasury Secretary Steven Mnuchin in a telephone call on Saturday, Chinese state media reported.

The call between Mnuchin and Liu, a confidante of President Xi Jinping, was the highest-level contact between the two governments since U.S. President Donald Trump announced plans for tariffs on up to $60 billion of Chinese goods on Thursday.

The escalating tension sent shivers through financial markets as investors foresaw dire consequences for the global economy if trade barriers start going up.

Several U.S. chief executives attending a high-profile forum in Beijing, including BlackRock Inc’s (BLK.N) Larry Fink and Apple Inc’s (AAPL.O) Tim Cook, urged restraint amid the intensifying trade spat.

In his call with Mnuchin, Liu, a Harvard-trained economist, said China still hoped both sides would remain “rational” and jointly work together to keep trade relations stable, the official Xinhua news agency reported.

U.S. officials say an eight-month probe under the 1974 U.S. Trade Act has found that China engages in unfair trade practices by forcing American investors to turn over key technologies to Chinese firms.

However, Liu said the investigation report “violates international trade rules and is beneficial to neither Chinese interests, U.S. interests nor global interests”, Xinhua cited him as saying.

In a statement on its website, the office of the U.S. Trade Representative Robert Lighthizer said the USTR had filed a request – at the direction of Trump – for consultations with China at the World Trade Organization (WTO) to address “discriminatory technology licensing agreements”.

COUNTER MOVES

“China has already prepared, and has the strength, to defend its national interests,” Liu said, adding that China hopes both sides can work hard to protect generally stable Sino-U.S. trade and business relations.

Both sides agreed to continue to communicate on the matter, Xinhua added, without providing further details.

China on Friday declared plans to levy additional duties on up to $3 billion of U.S. imports, including fruit and wine, in response to U.S. import tariffs on steel and aluminum, imposed after a separate U.S. probe.

China’s state-run Global Times said Beijing was only just beginning to look at means to retaliate.

“We believe it is only part of China’s countermeasures, and soybeans and other U.S. farm products will be targeted,” the widely-read tabloid said in a Saturday editorial.

Wei Jianguo, vice chairman of Beijing-based think tank China Centre for International Economic Exchanges, told China Daily that Beijing could impose tariffs on more U.S. products, and is considering a second and even third list of targets.

Possible items include aircraft and chips, Wei, a former vice commerce minister, told the newspaper on Saturday.

China potential measures were not confined to commodities, and tourism could be a possible target, he added.

SOYBEANS, AUTOS, PLANES

A former Chinese finance minister said at the China Development Forum in Beijing that the commerce ministry’s response so far had been relatively weak.

“If I were in the government, I would probably hit soybeans first, then hit autos and airplanes,” said the respected Lou Jiwei, currently chairman of the National Council for Social Security Fund (NCSSF).

U.S. farm groups have long feared that China, which imports more than third of all U.S. soybeans, could slow purchases of agricultural products, heaping more pain on the struggling U.S. farm sector.

U.S. agricultural exports to China stood at $19.6 billion last year, with soybean shipments accounting for $12.4 billion.

Chinese penalties on U.S. soybeans will especially hurt Iowa, a state that backed Trump in the 2016 presidential elections and is home to U.S. Ambassador to China Terry Branstad.

Boeing (BA.N) jets have also been often cited as a potential target by China.

China and the U.S. had benefited by globalization, Blackrock’s Larry Fink said at the forum.

“I believe that a dialogue – and maybe some adjustments in trade and trade policy – can be in order. It does not need to be done publicly; it can be done privately.”

Apple’s Tim Cook called for “calm heads” amid the dispute.

The sparring between China and the U.S. has cast a spotlight on hardware makers such as Apple, which assemble the majority of their products in China for export to other countries.

Electrical goods and tech are the largest U.S. import item from China.

Some economists say higher U.S. tariffs will lead to higher costs and ultimately hurt U.S. consumers, while restrictions on Chinese investments could take away jobs in America.

“I don’t think local governments in the United States and President Trump hope to see U.S. workers losing their jobs,” Sun Yongcai, general manager at Chinese railway firm CRRS Corp, which has two U.S. production plants, said at the forum.

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