US, China guarded on trade talk prospects

Washington - The US and China have played down the prospect of a diplomatic breakthrough to resolve their brewing trade dispute as President Donald Trump said investors may face short-lived "pain".

Serious negotiations between the two superpowers “have not really begun yet”, Larry Kudlow, head of the White House National Economic Council, told Bloomberg TV. Trump and Chinese President Xi Jinping speak to each other, as well as high-ranking figures from both governments, he added.

“Perhaps there will be some fruitful negotiations, but I would say they have been unsatisfactory, so we will see,” said Kudlow.

Trump on Thursday instructed the US Trade Representative’s Office to consider tariffs on an additional $100bn in Chinese imports, bringing to $150bn the range of Chinese goods under consideration. China has said it will respond proportionately, and has so far proposed duties on $50bn in US goods, including aircraft and soybeans.

The markets reacted negatively to the growing confrontation, with the S&P 500 Index down 1.1% as of 11:52 in New York on Friday.

“We Chinese won’t pick fights, but if someone picks a fight, we’ll resolutely meet them head on,” Chinese Ministry of Commerce spokesperson Gao Feng said at a press conference late on Friday in Beijing. Chinese and US officials haven’t held talks “for a period of time” on any economic or trade issues, Gao said.

Meanwhile, Trump said the spat with China may hurt the markets in the short term, but America will emerge stronger from it.

Trade pain

“I’m not saying there won’t be a little pain,” Trump said Friday during an interview on 77 WABC Radio’ “Bernie & Sid in the Morning” programme. “So we might lose a little of it, but we’re going to have a much stronger country when we’re finished, and that’s what I’m all about.’”

READ: China to respond to new US duties with 'same scale, intensity'

Some analysts have speculated the two countries could reach a detente before the tariffs on both sides take effect. The US hasn’t said when the initial round of tariffs on the $50bn of goods will come into force. There’s no timeline for developing a product list for Trump’s new request for tariffs on an additional $100bn worth of imports, and interested parties will have an opportunity to comment, an administration official said on Friday.

Blame China

Before the additional tariffs requested by the president, Kudlow had been working to tamp down worries of a full-out trade battle between the world’s two biggest economies. On Friday, he again rejected the notion that the world is in a trade war, but he pointed at China as the reason for escalating tensions.

“China is the problem. President Trump is the solution,” said Kudlow. “This is the first president in 20 years to have the backbone to go in and challenge China on the kind of unfair and illegal trading practices that they have adopted for the past several decades.”

Kudlow said there may be more serious negotiations between the two superpowers in the coming months, and that the US wants China to stop violating US intellectual property and open the Asian nation’s markets to more American merchandise and investment.

Earlier this month, China announced tariffs on $3bn of US goods such as pork and wine in retaliation for the steel and aluminium tariffs imposed last month by Trump.

Cooling tensions

Trump’s latest unexpected move on China threatens to unravel efforts by top US and Chinese trade officials to lower the heat and reach an agreement that could stave off an escalating conflict.

“This is starting to feel like the beginnings of a trade war, if simply each proposal is matched with a retaliation,” said Patrick Bennett, a Hong Kong-based strategist at CanadianImperial Bank of Commerce. “The US risks isolating itself from global trade in this process and we think the US, USD and US asset markets have more to lose.”

Trump struck a defiant tone during a speech in West Virginia on Thursday, saying it was time to stop China from “taking advantage” of America.

“You have to go after the people who aren’t treating you right,” Trump said. “We’re going to have a fantastic relationship long term with China, but we have to get this straightened out. We have to have some balance.”

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