China and the United States appear to be locked in a ‘game of chicken.’ As trade tensions between the two leading economic powers escalate, China’s US ambassador Cui Tiankai has warned Washington, not to up the ante.
In an interview with the state-owned CGTN news channel on Tuesday, he made it clear that Beijing would answer “in kind” if President Donald Trump’s administration presses ahead with plans to slap up to US$60 billion in tariffs on an array of Chinese goods.
“If they do we will certainly take countermeasures of the same proportion, and the same scale, same intensity,” he said.
Cui’s comments came less than 24 hours after President Xi Jinping’s government imposed tariffs worth $3 billion on a host of food and wine products in response to US sanctions on cheap steel and aluminum imports.
Later this week, US Trade Representative Robert Lighthizer is expected to reveal a list of Chinese products to be targeted in the next round of what is rapidly turning into a trade war.
At stake are core issues such as Washington’s view that the world’s second-largest economy has violated American intellectual property rights by forcing US companies to hand over technology before allowing them to do business in the country.
Even one of the White House’s staunchest critics, the Democrat Senator Elizabeth Warren, pointed out after a visit to China last week that US policy had been “misdirected” and that she was not afraid of tariffs.
“We told ourselves a happy face story that never fit with the facts,” Warren told the media. “Now, US policymakers are starting to look more aggressively at pushing China to open up the markets without demanding a hostage price of access to US technology.”
Markets in the US reacted strongly to Beijing’s decision to press ahead with tariffs. In Monday trading, the S&P 500 Index fell 2.2%, while the Dow Jones Industrial Average dropped 1.9%.
At least, it was a more muted response in Asia. Japan’s Nikkei 225 slipped by 0.45%, or 96.29 points, to close at 21,292.29, while South Korea’s Kospi was down 0.07% at 2,442.43.
Hong Kong’s Hang Seng Index also posted minor losses, but the Shanghai Composite dipped 0.85% to end at 3,136.44 points and the Shenzhen Composite fell 0.78% to finish at 1,842.23 points.
“A tariff ‘tit-for-tat’ is a lose-lose situation. So it’s likely that after this war of nerves, the world’s two largest economies will find a middle ground,” Hussein Sayed, the chief market strategist at trader Forextime, said in a note.
Global markets have been in a state of flux since Trump announced plans to rebalance the ballooning trade deficit with China. Last year, it hit a record high of more than $375 billion.
In February, China’s surplus with the US stood at $21 billion, official data from the General Administration of Customs showed, more than double the $10.4 billion reported during the same period last year.
“Everybody needs to relax. The [US] economy is as strong as an ox,” Peter Navarro, the White House trade adviser, told CNBC on Monday, adding that investors should not fear a trade war.
Anyone for chicken?
Why the pretext? The real war is about China Trade Strategy 2025 – to be world leader of A.I. by 2025! The U.S. is just trying to create a Gulf of Tonkin incident!
All show and tell and shadow boxing when both know that trade wars would be internecine. Military war is out of the question as both are nuclear powers. So, it is just mental war games and that is why it is all about A.I.!
Vincent Cheok
China can never think of sinking US carrier. China doesn’t want a Hiroshima n Nagasaki in Beijing.
So it was U$375 trade surplus, including export by American companies back to US. China would rather have no trade surplus with whining US and advance use of Yuan, specially in commodities… and that is Washington’s real concern behind this populist pleasing circus spin.
Gee, guess who will win? New, Increasing middleclass 1b+ consumer market or old, debit ridden 400m consumer market that’s been effectively bankrupt since 70s only kept afloat because of petrodollar?
Speaking of "curency manipulation" and "market distortion practices", unfortnately the corwn will have to go to the US as stated above, kept its consumer market artificially afloat for decades by relying on market distorting petrodollar to finance debt, and STILL haven’t managed to stablilize since the 70s! One can see where the petrodollar came from sicne WWII, had helped world stabilize back then but its becoming increasingly irrelevant and the holder is irrisponsibly abusing the priviledges. Seems like destructive US is reaching its logical conclusion- after deacedes of self destructive wars its gonna end with a self destructive trade war. China holds the card that can usher in this destruction (albeit with damage to itself) and trump is daring China to play. Well, there certainly is an itch to just play the hand get it over with and pick up the pieces to see the real sizes shall we?
If US is serious about reducing the trade deficit, it should first use more accurate figures, The present US methodology unfairly includes the entire value of imports from China even though the products are American products assembled in China with components sourced from all over the world. A recent study shows that the deficit is as low as U$30 billion instead of U$375 billion after accounting for the foreign components.
US runs a deficit with almost every trading partner because it is uncompetitive. It need to reduce spending on military, repair its infrastructure, depreciate the U$ and cooperate with China and NOT the other way around.