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?