With U.S. President Donald Trump gearing up to impose tariffs on $200 billion in Chinese goods and Beijing certain to retaliate against any measures, the world’s two biggest economies are locked in an escalating trade war, with no resolution in sight.
The United States is negotiating with Canada this week to try and finalize a deal to modernize the North American Free Trade Agreement, an outcome some in the White House say will allow Washington to turn up the heat on Beijing.
“The hope is that this (NAFTA) puts a lot of pressure on the Chinas of the world to help us negotiate better reciprocal trade deals,” Kevin Hassett, chair of the White House Council of Economic Advisers, told Reuters.
The world’s two largest economies have already applied tariffs to $50 billion of each other’s goods. Talks aimed at easing tensions ended last month without major breakthroughs, and Washington appears emboldened by a sell-off in Chinese markets and a weakening economy.
China is planning two choreographed celebrations of free trade – a major import fair in November and the 40th anniversary in late December of its move toward market reforms. However, Chinese government advisors are tamping down expectations either occasion will yield measures that could defuse tensions.
“China seems unable or unwilling to announce major liberalizations that could be termed ‘confidence building measures’ or ‘down payments’ on expected near-term reforms,” Craig Allen, president of the Washington-based U.S.-China Business Council, said in a letter to members over the weekend.
“We know that the President has received reports that the Chinese economy is struggling – reports that we believe are overstated – and thus he may believe that additional pressure might be effective in the short-term,” Allen said.
Washington is demanding Beijing improve market access and intellectual property protections for U.S. companies, cut industrial subsidies and slash a $375 billion trade gap.
The Trump administration is ready to move ahead with a next round of tariffs after a public comment period ends at midnight in Washington on Thursday, but the timing is uncertain, people familiar with the administration’s plans told Reuters.
The new duties will start to hit consumer products directly, including furniture, lighting products, tires, bicycles and car seats for babies.
Trump said he was not prepared to make a deal with China “that they’d like to make.”