China rejects backtracking claims

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Hopes of a US-China trade deal are hanging by a thread. AFP

China rejected US accusations of backtracking in trade talks and warned it would not “capitulate to any pressure” as the two sides headed into make-or-break negotiations on Thursday.

After months of seemingly collegial talks, Chinese trade envoy Liu He returns to the bargaining table in the American capital under a tense atmosphere after US negotiators accused Beijing of reneging on previously agreed commitments.

 

The US has raised the stakes with plans to increase tariffs on $200 billion of Chinese goods from 10 to 25 per cent on Friday, prompting Beijing to vow to strike back with “necessary countermeasures”.

“The US has assigned a lot of labels, such as backtracking, going back on one’s word and so on. Lots of promises have been foisted on China,” Chinese commerce ministry spokesman Gao Feng told reporters in Beijing.

 

“The Chinese side has kept its promises and this has never changed,” he added, without specifying what measures Beijing would take but warning that it “has already prepared for all possible situations.”

“China will not capitulate to any pressure, and we have the determination and ability to defend our own interests,” Gao said.

President Donald Trump tweeted Wednesday that Liu still wanted to “make a deal”, but the US leader boasted about tariffs that were “not good for China”.

“By the way, do you see the tariffs we’re doing? Because they broke the deal! They broke the deal!” Trump said at a rally in Florida on Wednesday.

 

“So they are flying in – the vice premier tomorrow is flying in. Good man. But they broke the deal. They can’t do that. So they’ll be paying if we don’t make the deal.”

The sudden rupture has roiled global stock markets this week and unnerved exporters caught off guard after negotiators on both sides had previously touted progress in the negotiations.

Markets in Europe and Asia sank again on Thursday.

American officials this week accused their Chinese counterparts of retreating from major planks of an agreement they had been working toward since early in the year that aims to resolve Washington’s grievances of industrial theft, massive state intervention in markets and a yawning trade deficit.

“It turns out the Chinese had pulled out an eraser and started taking back things that they had offered,” said Scott Kennedy, a China trade and economics expert at the Center for Strategic and International Studies.

“They didn’t realise when they pulled their concessions off the table that the administration would have the reaction that it did,” he said.

Kennedy warned that the “possibilities for miscalculation on both sides is pretty high.”

‘There’s a lot of pressure’

Since last year, the two sides have exchanged tariffs on more than $360 billion in two-way trade, gutting US agricultural exports to China and weighing on both countries’ manufacturing sectors.

US Trade Representative Robert Lighthizer released an official notice on Wednesday making the tariff increase a virtual fait accompli.

Punitive duties on a vast array of Chinese-made goods, from electrical equipment to machinery to seafood to furniture, will jump to 25 per cent at midnight on Thursday (10am Cambodian time on Friday).

Chinese producers of the impacted goods this week said the abrupt tariff hike had wreaked havoc on operations and would bring high costs, layoffs and further shifts of production to Southeast Asia.

“If the tariffs go up to 25 per cent, costs will go up, customers so far have suspended orders, I don’t know what will happen,” said Emily Wang of Hainan Zhongyi Frozen Food, which exports tilapia.

Washington has demanded far-reaching changes to the Chinese economy, such as submitting state enterprises to market principles, reducing massive subsidies and ending the alleged theft of US technology.

Analysts say China will be reluctant to make many of these changes, which could undermine the Communist Party’s political power.

Each side possibly believes it is better positioned than the other to survive the dispute, according to Kennedy.

“We’ll increase tariffs on China. We won’t back down until China stops cheating our workers and stealing our jobs,” Trump told the Florida crowd.

“The era of economic surrender is over.”

While US companies complain of lost export markets, disrupted supply chains and higher costs, the US continues to see steady growth and falling unemployment.

Anthony Nieves, who heads a survey of the services sector by the Institute for Supply Management, said the tariffs were hitting China “a lot more than what we’re feeling over here in the states. There’s a lot of pressure on them.”