US-China trade war imminent with Trump, Obama taking pot shots

BEIJING: The first signs of a looming US-China trade war have began to surface. US president elect Donald Trump has selected Peter Navarro, a well-known China critic, to head a White House based trade council after he takes office next month.

The Obama administration moved the World Trade Organization on Thursday blaming China for blocking US exports of rice. The US government put Alibaba Group’s online shopping site, Taobao, in the blacklist of “natorious marketplaces” on charges of allowing sale of counterfeit goods. The Beijing based Global Times quoted Alibaba as saying that the decision was influenced by the current political climate.

Trump’s decision to select Navarro is seen as a confirmation that Trump would go ahead with his election promises of creating tax and other trade barriers on China. Trump has questioned Chinese investments in the US, threatened to impose a steep 45 per cent duty on Chinese goods and declare China as a “currency manipulator”. Many in China felt that those statements were part of the election rethoric and Trump would get down to normal business without upsetting the apple cart once he enters the White House. But the Navarro appointment shows he is going to walk his talk.

There are clear signs China is extremely worried about Trump’s likely moves because the U.S. is the country’s second biggest export market after the Europe Union. It is also the most important destination for commercial investments and technology sourching by Chinese companies.

Asked about Peter Navarro’s selection, the Chinese foreign ministry spokesperson, Hua Chunying said on Thursday, “I want to emphasise that as major countries, China and the US share a lot of common interests. China wants to maintain sound bilateral trade relations. Mutual cooperation is the right choice for the two countries, and this is beneficial for world peace and development”.

On its part, China is readying itself to retaliate against any negative trade action from Washington. China’s riches man and chairman of Dalian Wanda Group, Wang Jianlin, has already threatened to pull out his $10 billion investments in the US. Wang, who runs the biggest threatre chain in the US, said he employs 20,000 people, who will have “nothing to eat” if he pulled out owing to restrictions imposed by Washington.

“If Trump imposes high tarrif on Chinese goods, China will surely retaliate,” Zhang Yunling, member of the National Committee of Chinese People’s Political Consultative Conference, one of the two houses of Chinese parliament, told TNN. “The international system will be in danger if that happens” he said.

China, the second biggest economy, has sufficient levers to put US companies under severe pressure if it decides to retaliate, analysts said. This is evident in the fears expressed by the American Chamber of Commerce in China.

“We do indeed recognize that talking tough is a lot easier than thinking tough and making tough decisions, which is what presidents actually have to do,” he said adding, “The chamber has long supported maintaining stability in the region, and we expect the new U.S. administration to respect the status quo,” James Zimmerman, chairman of AmCham, China said in an emailed reply.

Zimmerman pointed out that 1,500 Chinese companies are operating in the US employing over 80,000 people after making an investment of $65 billion. Investments made by US companies in China have topped $150 billion.

“Isolating or penalizing China will not serve America’s interests, and only with engagement and commerce will the two largest economies of the world make progress to reach a consensus on contentious issues such as national and regional security, market access and industrial policies, internet censorship, cybersecurity, and terrorism,” he said.

Citing possible economic actions by China, Mark Williams, Chief Asia Economist for Capital Economics said, “China might subject U.S. companies to tighter regulation that hampers their capacity to do business. Beijing may also encourage its exporters by offering tax rebates to overcome any reduction in export demand in the US”.

“U.S. exports of cars and aircraft would be in the firing line,” he said. Besides, U.S. companies would find their products and operations in China subject to tighter regulation that hampered their capacity to do business there, he said.

Beijing is also blistering in anger against Trump’s recent comment questioning the One-China policy. China wants all countries to recognize Taiwan as part of its territory under this policy. But Trump suggested he might review US stand on this issue because Taiwan is a close allay of Washington.

In the past, China has used economic boycott to express its displeasure over political issues like granting visa to the Dalai Lama. It has taken similar economic action against Mangolia where the Dalai Lama visited recently. Trump’s questioning the One-China policy, which Beijing regards as a “core issue” is also a cause for China to initiate negartive economic actions.

At the moment, it is the US which has initiated trade actions against China with the Obama administration moving the WTO over rice exports. This will keep Beijing busy defending itself at a time when the European Union is contemplating a new law that will make Chinese exports to Europe more expensive.

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