Published: Mon, May 13, 2019
Markets | By Otis Pena

China stands firm in trade talks with US

China stands firm in trade talks with US

Investors watched the latest developments warily in the trade war between the world's top two economies, after negotiations in Washington ended Friday without agreement and a tariff hike on Chinese imports went into effect.

China will never surrender to external pressure, the government said on Monday, though stopped short of announcing how Beijing will hit back after Washington renewed its threat to impose tariffs on all Chinese imports in an escalating trade dispute. "You had a great deal, nearly completed, & you backed out!"

Pressed about comments in which Mr. Trump has alleged Beijing will end up paying for the increased levies, Kudlow responded that "both sides will suffer on this".

China's top trade negotiator, Liu He, said Friday that talks would continue in Beijing at an unspecified date. "I don't know. That will take some time and then of course the president's going to have to make the final decision on that".

In China, state media said the door to talks was always open but China would not yield on important issues of principle.

Trump has also threatened to impose import taxes on the remaining $300 billion in Chinese imports, a step that Kudlow estimated would take several months to implement.

"Our base case remains that a trade deal between the United States and China is likely".

US Trade Representative Robert Lighthizer is thought to be ready to implement tariffs on the remainder of China's exports.

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The tariffs are not paid by the Chinese government or by firms located in China.

Pressed by Fox News' Chris Wallace, Kudlow appeared to contradict Trump's recently adopted mantra that an increase in tariffs on Chinese goods is entirely beneficial to the US.

"If they weren't being seriously provoked, the Chinese people would not favor any trade war. This is a tool China will save as a last resort, and it may not even be used in the unlikely event of a breakdown in trade negotiations".

So far, Trump's moves haven't had any major negative consequences for the USA economy, but analysts say the fallout from their escalating rivalry could eventually be felt worldwide.

There are many other sources of tension ripe for flare-ups: US military aid to self-ruled Taiwan, Chinese territorial claims in the disputed South China Sea, US criticism of Beijing's Belt and Road global infrastructure programme, and US security warnings against Chinese telecom champion Huawei.

Trump's hard line on China has been largely cheered by politicians in Washington, though Democrats have accused the president of alienating allies who might help apply more pressure on Beijing.

The US argues that China's trade surplus with the US is the result of unfair practices, include state support for domestic companies. Ironically, such efforts could reduce the possibility of a deal and prolong the tariffs, one person close to the talks said.

"Before then, we had a Chinese administration that played the game on westernising, which led the United States and the European Union to say, "Let's give them more than the benefit of the doubt, let's open the door and give them developing country status", he said.

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