Four reasons Chinese officials aren't buying Trump's trade threats

Trump Proposes $100 Billion in New Tariffs In a Potentially Serious Escalation of the Trade War With China

Pledges on autos and IP were accompanied by a promise to push through reforms in the financial services industry, which would open up to more foreign participation - reforms first announced previous year.

Chinese President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing, in a speech that also warned against returning to a "Cold War mentality" amid trade disputes with US counterpart Donald Trump.

"The domestic demand is the main driving force of China's economic development and is necessary for addressing the nation's growing need in a better life", Xi said delivering a speech at the BFA.

President Xi Jinping vowed on April 10 to take new steps to open China's economy "wider and wider" amid a broiling trade confrontation with the United States.

Third, China's extraction of intellectual-property through joint-venture requirements is largely a problem for companies outsourcing production from the United States, and not for American workers.

The new White House economic adviser, Larry Kudlow, said Sunday that a "coalition of the willing" - including Canada, much of Europe and Australia - was being formed to pressure China and that the USA would demand that the World Trade Organization, an arbiter of trade disputes, be stricter on Beijing.

Stocks markets fell after that and Trump's statement last Friday calling for another wave of tariffs sent the Dow Jones Industrial Average 572 points or 2.3% lower from the day before.

China's stocks are among fund managers' top picks for 2018 as they bet the United States and China will avert a full-blown and potentially costly trade war.




The astounding USA trade deficit with China stands at some $375 billion despite the Chinese market being the third-biggest for American products. Hopefully, Trump's negotiation efforts will succeed and he will gain enough concessions to de-escalate this trade war.

Xi's choice of vehicles as a specific product class was telling as a message to Trump; the USA president used precisely the example of Chinese tariffs on cars in voicing his grievances about Chinese trade practices. In announcing 25 percent tariffs on, among other things, soybeans and automobiles, Chinese leaders were hitting the president where they knew it would hurt, as the biggest soybean producers include Iowa, Ohio, Missouri, and Indiana. Rather than waiting weeks for the US tariffs to be implemented, Trump backed a plan by Robert Lighthizer, his trade representative, to seek the enhanced tariffs. The official said that the USA was expecting China to put concrete proposals forward.

China's global surpluses are now far below the US negotiating targets of a few years ago, China has spent about $1 trillion propping up its currency, and intellectual-property protections are far better enforced.

Nearly by definition, trade wars are negative-sum games and, as such, the chief antagonists would suffer, according to Dr. James Jingdong Wang, associate professor at City University of Hong Kong.

The US hasn't said when the duties will take effect.

"We still believe... that this will be one of the possible "carrots" that China will present in line with various "stick" threats".

The biggest beneficiaries of a cut in China's 25 per cent tariff on most auto imports will be the small number of automakers such as electric vehicle brand Tesla that have no factory in China. "Yet the order contained no immediate action and left the door open for talks".

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