Both President Trump and China are doubling down on their threats of imposing new and potentially damaging tariffs. But China on Friday gave an indication it is now willing to help the U.S. reduce its trade deficit, which may be a victory for Trump’s get-tough policy.
Responding to China’s vow to impose 25% tariffs on US imports such as soybeans, Trump said he was ready to target $100 billion in Chinese imports with new duties. Not to be outdone, the Chinese said they were prepared to respond at “any cost.”
U.S. Trade Representative Robert Lighthizer said the angry Chinese response to Trump’s threat was not justified. “Unfortunately, China has chosen to respond thus far with threats to impose unjustified tariffs on billions of dollars in U.S. exports, including our agricultural products,” he said.
“Such measures would undoubtedly cause further harm to American workers, farmers and businesses,” Lighthizer said. “Under these circumstances, the president is right to ask for additional appropriate action to obtain the elimination of the unfair acts, policies and practices identified in USTR’s report.”
Neither side has given a date for the punitive tariffs to be implemented, giving them wiggle room to negotiate a solution.
Trump’s main concern is the theft of intellectual property by Chinese firms, which has been estimated at more than $200 billion in lost revenue every year. The administration is also trying to force China to drop its policy of requiring foreign firms in China to form a joint venture with Chinese companies and share technology with them.
The American Chamber of Commerce in China, which is normally wary about angering Beijing, said on Friday that Trump was right to press the case on behalf of U.S. firms.
“Trade wars have a history of not ending well. But after years of bilateral negotiations with only incremental progress, the U.S. seems to feel it is left with few options,” said AmCham China Chairman William Zarit. “The proposed trade remedies may not be perfect, but based on past talks, the U.S. probably feels that without pressure, little progress will be made.”
While most of the attention has been focused on the war of words between Trump and China, the Chinese premier, Li Keqiang, told reporters that China understands the U.S. concerns about its large trade deficit and expressed willingness to work toward reducing the deficit.
“A large trade deficit is not something we want to see,” he said. “What we want to see is balanced trade; otherwise, this kind of trade will not be sustainable.”
He held out the possibility of cutting Chinese import tariffs on foreign drugs and cooperating in other ways to bring down the U.S. trade deficit. Trump has asked for “reciprocity,” meaning that China treat American goods as the U.S. treats Chinese products. Currently, automobiles are taxed at 2% in the U.S., for example, while China slaps a 25% import duty on them.
“We hope this important means for balancing China-U.S. trade will not be missed because that would be missing a good opportunity for making more money,” Li said at the press conference.