China says trade deals are off if U.S. raises tariffs
China has balked at stepping up its purchases of American products, raising the odds of a trade war, if President Donald Trump follows through on his threat to tax billions of dollars’ worth of Chinese imports. The warning from Beijing came after delegations led by U.S. Commerce Secretary Wilbur Ross and China’s top economic official, Vice Premier Liu He, wrapped up talks on Beijing’s pledge to narrow its trade surplus. White House advisers were insisting on fundamental changes in ties between the world’s two biggest economic powers. At the outset of the event Ross said the two sides had discussed specific American exports China might purchase, but the talks ended with no joint statement and neither side released details. “Both sides appear to have hardened their negotiating stances and are waiting for the other side to blink,” said Eswar Prasad, professor of trade policy at Cornell University. “Despite the potential negative repercussions for both economies, the risk of a full-blown China-U.S. trade war, with tariffs and other trade sanctions being imposed by both sides, has risen significantly.” Asked specifically on Fox’s “Sunday Morning Futures” if the U.S. is willing to throw away its relationship with China by proceeding with threatened tariff hikes, Peter Navarro, director of the White House National Trade Council, pointed in part to an unfair relationship involving a multi-billion dollar trade deficit, Defense Secretary Jim Mattis’ warning of China’s activities in the South China Sea and the threat of China stealing U.S. intellectual property. “That’s a relationship with China that structurally has to change,” he said. “We would love to have a peaceful, friendly relationship with China. But we’re also standing firm that the president is the leader on this.” The United States has threatened to impose tariffs on up to $50 billion of Chinese products in a dispute over Beijing’s aggressive tactics to challenge U.S. technological dominance; Trump has asked U.S. Trade Rep. Robert Lighthizer to look for another $100 billion in Chinese products to tax. China has targeted $50 billion in U.S. products for possible retaliation. Tensions temporarily eased on May 19 after China promised to “significantly increase” its purchases of U.S. farm, energy and other products. Treasury Secretary Steven Mnuchin said then that the U.S. tariffs were suspended and the trade war was “on hold.” The purchases are meant to reduce America’s massive trade deficit in goods and services with China, which last year came to $337 billion, according to the U.S. Commerce Department. After the apparent cease-fire, global financial markets rallied in relief. But Trump upended the truce last Tuesday by renewing his threat to impose 25 percent tariffs on $50 billion in Chinese high-tech goods. The tariffs are meant to pressure Beijing for allegedly stealing trade secrets and forcing foreign companies to hand over technology in exchange for access to the Chinese market. Navarro later called Mnuchin’s conciliatory comments “an unfortunate soundbite.” Ross nonetheless journeyed to Beijing Friday to work out details of the vague agreement Mnuchin had earlier cobbled together with the Chinese vice premier. China balked at making concessions unless the U.S. lifted the tariff threat. “If the United States introduces trade sanctions including a tariff increase, all the economic and trade achievements negotiated by the two parties will not take effect,” said a Chinese government statement, carried by the official Xinhua News Agency. The negotiating process should be “based on the premise” of not fighting a “trade war,” the statement said. The dispute with China comes at the same time Trump has riled some of America’s closest allies with the imposition of tariffs on steel and aluminum imports. After a three-day meeting of finance ministers from the G7 industrial nations that ended Saturday in Canada, Canadian Finance Minister Bill Morneau issued a summary saying the other six members want Trump to hear their message of “concern and disappointment” over the U.S. trade actions. Allies including Canada and the European Union are threatening retaliatory tariffs. Canadian Prime Minister Justin Trudeau told NBC’s Meet the Press on Sunday that the reciprocal tariffs would hurt both U.S. and Canadian workers and consumers. He also pushed back against the argument that Canadian steel poses a U.S. security threat. “The idea that we are somehow a national security threat to the United States is quite frankly insulting and unacceptable,” he said. Bruno Le Maire, France’s finance and economy minister, also called the U.S. tariffs unjustified. “We regret that our common work together at the level of the G7 has been put at risk by the decisions taken by the American administration on trade and on tariffs,” he said. Trade analysts had warned Ross’s hand might be weakened if the Trump administration alienated allies who share complaints about Chinese technology policy and a flood of low-priced steel, aluminum and other exports. Republished with the permission of the Associated Press.
U.S.-China trade talks center on rivalry over technology
A high-powered U.S. delegation arrived in Beijing on Thursday for talks with Chinese officials on defusing tensions that are propelling the world’s two largest economies toward a trade war. Treasury Secretary Steven Mnuchin is leading the group, which includes Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. Liu He, President Xi Jinping’s top economic adviser, was heading the Chinese side in the talks, which analysts say appear unlikely to yield a breakthrough given the two sides’ intensifying rivalry in strategic technologies. President Donald Trump said he expected relations with Beijing to stay on an even keel. “Our great financial team is in China trying to negotiate a level playing field on trade!” he said on Twitter late Wednesday. “I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!” Trump is seeking to cut the chronic U.S. trade deficit by $100 billion and gain concessions over policies that foreign companies say force them to share technology with Chinese partners in order to gain market access. His administration has threatened to impose new tariffs on roughly $150 billion in Chinese goods — prompting China to announce its own tariffs on U.S. goods. The dispute has deepened as China stepped up efforts to overtake western industry leaders in advanced technologies, especially for semiconductors, the silicon brains required to run smartphones, connected cars, cloud computing and artificial intelligence. Under Xi, a program known as “Made in China 2025” aims to make China a tech superpower by advancing development of industries that in addition to semiconductors includes artificial intelligence, pharmaceuticals and electric vehicles. The plan mostly involves subsidizing Chinese firms. But it also does require foreign companies to provide key details about their technologies to Chinese partners. Beijing looks unlikely to cede any ground on that strategic blueprint. “The Made in China 2025 industrial policy concerns China’s long-term development plan, so the overall direction won’t change at all,” said Yu Miaojie, professor at Peking University’s National School of Development. Yu says China would rather cut the trade deficit by importing high-tech products from the U.S. that are currently tightly restricted. Striking an adamant tone, the state-run Global Times newspaper said Thursday in a commentary that it’s “our sovereign right to develop high-tech industry and it is connected to the quality of rejuvenation of the Chinese nation. It will not be abandoned due to external pressure.” Both sides have shown a diversity of opinions, with China recently moving to loosen a restriction on foreign ownership of automakers to minority stakes. But the rival views in Washington, reflected in the makeup of the U.S. team, could undermine the U.S. negotiating stance, the consulting firm Eurasia Group said in a research note. “The U.S. delegation headed to Beijing is too large and unwieldy to accomplish much; it is a reflection of inter-agency rivalry on the U.S. side and this will produce more posturing than actual negotiations with the Chinese,” the firm said. “The trip will produce few results and increases the risk that tariffs are adopted in the near future,” it added. Washington’s recent decision to ban Chinese telecom gear maker ZTE from importing U.S. components in a sanctions-related case drove home to Beijing its costly vulnerability to foreign sources for advanced microchips. The “Made in China 2025” plan calls for domestic producers to supply 70 percent of the country’s chip demand. The Trump administration’s efforts may actually spur China to ramp up efforts to develop its domestic industry as it strives to fulfill Xi’s vision, said Jian-Hong Lin, an analyst at research firm TrendForce. China now consumes nearly 60 percent of the world’s semiconductors but supplies only about 16 percent, according to PWC. The country spends more than $200 billion a year on foreign-made semiconductors, which in 2015 surpassed crude oil as the country’s biggest import. Experts say Chinese chipmakers are five years behind their U.S. and Asian rivals and that increasingly high technological hurdles and a meager talent pool are hindering the effort to catch up with dominant U.S., Japanese, South Korean and Taiwanese manufacturers. As Chinese researchers and chipmakers strive to catch up, the technology is evolving, with new materials transforming the future landscape of the electronics industry. The latest advanced chips are highly complex to make because of their increasingly tiny “nodes,” measured in nanometers, that make them faster and more power-efficient. Beijing has been backing up its towering ambitions in the semiconductor sector with money and tax breaks. The government set up the National Integrated Circuit Industry Investment Fund in 2014, seeded with 140 billion yuan ($22 billion) in capital to invest in chip companies. A second round of fundraising for as much as 200 billion yuan is underway, Chinese media report. The state-controlled Tsinghua Unigroup project, associated with Tsinghua University — China’s equivalent of MIT — has emerged as a national champion. It’s building two massive memory chip factories, including a $30 billion facility in Nanjing that will churn out 100,000 wafers a month and is expected to exert a “siphon effect,” drawing microchip industry suppliers and experts to the area. It’s unclear how successful those efforts will be as foreign regulators push back against Beijing’s strategy of acquiring overseas chipmaking-related firms. Washington has scuppered multiple China-linked bids for semiconductor-related firms following a call from a White House advisory panel to do more to protect the U.S. industry because of China’s industrial policies. Market leaders like Samsung, Intel and Taiwan Semiconductor Manufacturing are investing aggressively as they fight for market share. “Even though they’ve (the Chinese) committed a lot of money to the investment fund, the reality has sunk in that it’s harder than just throwing money at the problem. The Samsungs of the world, the TSMCs have a large head start,” said Alexander Wolf, an economist at Aberdeen Standard Investments. “Certain products, you can’t really reverse engineer.” Companies like Huawei and ZTE are avidly pursuing advanced semiconductor technology, but experts say overall Chinese research and development
