Washington, Beijing flexing muscles in trade dispute

A view show US fruit products at a supermarket in Beijing, China, 02 April 2018. China has imposed tariffs of 15 percent and 25 percent on 128 US imports according to the different products beginning from 02 April 2018, including pork, wine, fruits and others, after US President Donald Trump raised duties on foreign steel and aluminium imports in March. [EPA-EFE/WU HONG]

The temperature is rising between the United States and China but the simmering confrontation has not yet boiled over into a trade war, since the tit-for-tat countermeasures so far have been confined to a few specific products.

Beijing on Monday (2 April) imposed tariffs on 128 American goods, retaliating for President Donald Trump’s decision last month to slap import duties of 25% on steel and 10% on aluminum.

Washington was primarily targeting China which has long been accused of flooding the global market with the metals, but the tariffs hit US allies as well, prompting Trump to exempt several countries, including major producers Mexico and Canada.

Trump has repeatedly accused China of unfair trade practices he says harm US businesses and swell the bilateral trade deficit. But the country accounts for less than three percent of US steel imports.

Trump temporarily excludes EU from higher tariffs, announces measures to ‘punish’ China

US President Donald Trump yesterday (22 March) temporarily excluded six countries and the European Union from higher import duties on steel and aluminium due to come into effect today.

Beijing retaliated by targeting US pork, recycled aluminum, nuts, fruits and wine, but for the moment has left the most sensitive areas like soybeans or Boeing aircraft untouched.

Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, notes that China’s response Monday was “symbolic.”

“They’ve done nothing on sorghum. They’ve done nothing on soybeans,” she told AFP, adding that China’s response mirrored Trump’s moves.

And Beijing has not yet responded to White House plans announced March 23 to impose tariffs on $60 billion worth of other Chinese exports in retaliation for the alleged theft of US intellectual property.

Even so, “They sent a very clear signal that China is going to respond quickly and in time to any US trade action,” Edward Alden, a trade expert at the Council on Foreign Relations, told AFP.

Alden noted that the response marked the first retaliation by any country since Trump announced the metal tariffs last month.

The European Union has held its fire – despite announcing a list of goods that will be targeted with punitive duties – while South Korea made deep concessions in renegotiating the Korea-United States Free Trade Agreement, yielding under the pressure of Trump’s threatened metals tariffs.

Commission opens the door to solve US tariff dispute

The European Commission is ready to discuss “any issue” the US Administration wants to raise as it seeks to obtain a permanent exemption from the tariffs announced by President Donald Trump.

‘China is not Korea’

“The US is the biggest market in the world and Trump believes that other countries will make concessions in order to keep that access. Korea is willing to do that,” Alden said.

But, while Seoul has so far been willing to negotiate, the final response from Beijing remains an unknown de Bolle said.

“China is not Korea.”

And Beijing has options. It could choose to import pork from Brazil or Argentina, and. It could likewise find other suppliers for soy, even if China currently relies most heavily on American producers.

Ironically, the world’s largest pork producer, US-based Smithfield Foods, has been Chinese owned since 2013.

De Bolle said Beijing likely believes it has greater a capacity to inflict pain on the United States than vice versa.

But pressure is mounting on Trump as metal prices begin to rise — something Commerce Secretary Wilbur Ross predicted would be painless for most businesses and consumers.

Timothy Fiore, who oversees a monthly survey of the US manufacturing companies for the Institute of Supply Management, said Trump’s new tariffs were driving up supply costs for manufacturers which use steel and aluminum.

Suppliers began raising their prices within 24 hours after Trump announced his intention to impose the tariffs – with the price now up a sharp 19% at $860 a ton, Fiore said.

Growth in the manufacturing sector could slow if trade tensions between the world’s two largest economies continue to mount, he told reporters in presenting ISM’s March survey results.

But de Bolle noted that talks are continuing between Washington and Beijing.

“We are certainly close to the brink of a trade war, but it does not mean there will be trade war.”

Macron: We won’t negotiate ‘with a gun to our head’ over US tariffs

The EU’s temporary exclusion from punitive US tariffs on steel and aluminium “did not appear satisfactory to us,” French President Emmanuel Macron said after an EU summit on Friday (23 March). “Europe will not waiver,” he said.

Subscribe to our newsletters