Trump’s Trade War Threat Poses Problems for China and Investors

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FILE -- President Donald Trump and China's president, Xi Jinping, in Beijing, Nov. 9, 2017. President Trump on May 5, 2019, threatened to increase tariffs on $200 billion in Chinese goods on May 9 and impose levies on hundreds of billions of dollars of additional imports “shortly,” a move that appeared to be aimed at forcing China to agree to a final trade deal as soon as this week. (Doug Mills/The New York Times)

 

 

 

Keith Bradsher and Ana Swanson

c.2019 New York Times News Service

The prospect of a wider trade war between the United States and China sent global financial markets whipsawing Monday and could force Beijing to make difficult decisions if it hopes to preserve its nascent economic recovery.

 

President Donald Trump upended what appeared to be steady progress toward reaching a trade pact after he threatened Sunday to impose still more tariffs on Chinese-made goods unless Beijing moves closer to a deal. Liu He, the Chinese vice premier overseeing economic policy and Beijing’s lead trade negotiator, had been set to travel to Washington for talks scheduled for Wednesday that were widely seen as the potential last round before reaching a trade deal.

 

Liu’s plans were unclear as of Monday. People familiar with the talks said officials are considering whether Liu should keep his plans to visit Washington. The people spoke on condition of anonymity because they were not authorized to speak publicly.

 

The threats pose a major problem for Xi Jinping, China’s top leader, who had been counting on a trade deal to keep China’s growth engine humming. Broad differences still separate the two sides on many issues and Trump’s tweeted threat Sunday indicated that the United States may be less willing to accept compromises than some of his senior aides had previously seemed to suggest.

 

In recent months, thanks in part to new lending, China’s slowdown appeared to stabilize. The prospect of a trade deal also boosted consumer and investor confidence and led many economists to estimate China’s growth would improve.

 

New tariffs could derail that progress. Through Twitter, Trump warned Sunday that he would increase tariffs on $200 billion in Chinese goods at the end of this week and “shortly” impose levies on $325 billion of additional imports.

 

Xi will face internal difficulties in coping with Trump’s aggressive threat. He risks weakening his position if he is seen as giving in to U.S. demands, especially in areas where many people in China feel the country has to make progress, such as in technology, if it wants to keep growing at a healthy pace.