China warns US trade deals off if tariffs go ahead

Comes after meeting between teams led by U.S. Commerce Secretary Wilbur Ross and Chinese Vice Premier Liu He, on Beijing’s pledge to narrow its trade surplus

U.S. Commerce Secretary Wilbur Ross (left) with Chinese Vice-Premier Liu He during a photograph session after their meeting at the Diaoyutai State Guesthouse in Beijing on June 3, 2018.

China warned on Sunday after another round of talks on a sprawling trade dispute with Washington that any deals they produce “will not take effect” if President Donald Trump’s threatened tariff hike on Chinese goods goes ahead.

The warning came after delegations led by U.S. Commerce Secretary Wilbur Ross and China’s top economic official, Vice Premier Liu He, wrapped up a meeting on Beijing’s pledge to narrow its trade surplus. Mr. Ross said at the start of the event they had discussed specific American exports China might purchase, but the talks ended with no joint statement and neither side released details.

US renews threat

The White House threw the meeting’s status into doubt on Tuesday by renewing a threat to impose 25 per cent tariffs on $50 billion of Chinese high-tech goods in response to complaints Beijing steals or pressures foreign companies to hand over technology. The event went ahead despite that but Beijing said it reserved the right to retaliate.

Tuesday’s announcement revived fears the conflict between the two biggest economies might dampen global growth or encourage other governments to raise their own barriers to imports.

“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 the Chinese 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 American Embassy in Beijing didn’t immediately respond to a request for comment.

Trump wants trade surplus narrowed

Mr. Trump is pressing Beijing to narrow its politically volatile trade surplus with the United States, which reached a record $375.2 billion last year.

Tensions eased after China promised on May 19 to “significantly increase” purchases of farm goods, energy and other products and services following the last round of talks in Washington. U.S. Treasury Secretary Steven Mnuchin said the dispute was “on hold” and the tariff hike would be postponed.

That truce appeared to end with Tuesday’s surprise announcement. It said the White House also will impose curbs on Chinese investment and purchases of U.S. high-tech goods and on visas for Chinese students.

Will he play to the gallery?

Analysts suggested Mr. Trump might be trying to appease critics of his administration’s deal to allow Chinese telecom equipment giant ZTE Corp. to stay in business. They said those political pressures mean the technology-related tariff hikes are likely to go ahead.

Members of Congress criticized the agreement to lift a ban on sales of U.S. components to ZTE, which admitted to violating rules on exports to Iran and North Korea. In exchange, the company is to remove its management team, hire American compliance officers and pay a fine.

Mr. Trump has threatened to raise tariffs on a total of up to $150 billion of Chinese goods. Tuesday’s announcement gave no indication whether the other increases might also go ahead.

Now, China’s threat

China has threatened to retaliate by raising import duties on a $50 billion list of American goods including soybeans, small aircraft, whiskey, electric vehicles and orange juice. It criticized Tuesday’s announcement but refrained from repeating its earlier threat.

Beijing has resisted U.S. pressure to commit to a firm target of narrowing its annual surplus with the United States by $200 billion.

Private sector analysts say while Beijing is willing to compromise on its trade surplus, it will resist changes that might threaten plans to transform China into a global technology competitor.

Mr. Ross was accompanied by agriculture, treasury and trade officials for the meeting at the Diaoyutai State Guesthouse, a leafy compound on Beijing’s west side. Mr. Liu’s delegation included China’s central bank governor and Commerce Minister.

Mr. Ross and Mr. Liu held a working dinner on Saturday ahead of their talks.

“Our meetings so far have been friendly and frank, and covered some useful topics about specific export items,” said Mr. Ross at the opening of Sunday’s meeting.

China as a competitor

The U.S. pressure over technology policy reflects growing American concern about China’s status as a potential competitor and complaints Beijing improperly subsidizes its fledgling industries and shields them from competition.

Foreign governments and businesses cite strategic plans such as “Made in China 2025,” which calls for state-led efforts to create Chinese industry leaders in areas from robots to electric cars to computer chips.

Trade analysts had warned Mr. Ross’s hand might be weakened by the Trump administration’s decision on Thursday to go ahead with tariffs on steel and aluminum imports from Canada, Europe and Mexico.

That might alienate allies, who share complaints about Chinese technology policy and a flood of low-priced steel, aluminum and other exports they say are the result of improper subsidies and hurt foreign competitors.