By Lingling Wei
BEIJING -- New U.S. tariffs on China's exports escalated the
countries' trade fight, with Chinese officials scrambling on how to
retaliate and whether to accept Washington's offer for more
negotiations.
After President Trump announced the new tariffs on $200 billion
in Chinese goods, the Chinese leadership's economic troubleshooter,
Vice Premier Liu He, huddled Tuesday with his top lieutenants to
devise a response, according to officials briefed on the matter. On
the agenda was whether Mr. Liu or lower-level officials should go
to Washington for a fresh round of trade talks.
China's Commerce Ministry, in a brief statement midday, said
that the U.S. tariffs create "new uncertainty" for negotiations and
vowed that China would retaliate. Unmentioned was whether China
would go ahead with an earlier threat to place tariffs on $60
billion worth of U.S. products.
Beijing's more muted response reflects the dilemma the Chinese
leadership faces as the world's two largest economies pitch closer
to a full-bore trade war. President Xi Jinping has banked his
popularity and strongman reputation on turning China into a global
power and can't afford to back off, instructing officials to stand
firm and punch back in negotiations.
Meanwhile, concerned that a spiraling trade fight could harm an
already slowing economy and derail China's onward rise, Mr. Xi has
also ordered his officials to keep engaging with Washington and
American businesses, according to Chinese officials and government
advisers.
President Trump upped the stakes for Beijing Monday, first by
saying that the new 10% tariffs on $200 billion in Chinese goods
would take effect in only one week's time. Then he reiterated a
threat to hit another $267 billion of Chinese imports with tariffs
if Beijing retaliates. Combined with goods already hit with
punitive levies, the total would exceed the $505 billion in Chinese
goods the U.S. imported last year.
Because China imports far fewer goods from the U.S. -- just
under $130 billion last year -- Beijing is running out of products
to penalize.
"The U.S. is in the driver's seat," a Chinese official said.
President Trump first threatened the $200 billion tariff round
in July. While companies have had more than two months to digest
the possibility, the escalation still jangled nerves. Business
executives, including e-commerce titan Jack Ma, took the new
tariffs as a signal that trade tensions aren't going to dissipate
soon.
The new U.S. tariffs will affect a broad range of products used
by business and consumers, from auto parts to luggage. That's a
particular problem, business representatives warned, for companies
with global supply chains reliant on China.
"Strategically, I think they should have a plan B," said Carlo
Diego D'Andrea, chairman of the manufacturing-heavy Shanghai
chapter of the European Chamber of Commerce in China. While in past
episodes of U.S.-China trade fights, European companies could
expect to win orders at the expense of American firms, this time,
they expect to be caught in the crossfire, according to a survey of
member companies by the European Chamber.
In recent days with the new U.S. tariffs looming, Chinese
officials and government advisers have questioned whether it's time
to negotiate with the Trump administration.
Vice Premier Liu gathered with other senior economic officials
on Tuesday to consider Treasury Secretary Steven Mnuchin's
invitation last week for more talks in Washington, the officials
briefed on the matter said.
Accepting the U.S. invitation would go against Beijing's public
stance that it won't negotiate under the gun, the officials said,
while declining could risk aggravating the tensions.
An option being considered, the officials said, involves sending
a lower-level trade official -- Vice Minister of Commerce Wang
Shouwen -- for talks this month while sparing Mr. Liu. Under the
original plan, lower-level talks were to take place this week ahead
of Mr. Liu's trip to Washington late next week. As of late Tuesday,
no final decisions were made on the issue, according to the
officials.
An ally of Mr. Liu's vented Tuesday about the pressure from
Washington. "Negotiations can't be done with this kind of tactic,"
Fang Xinghai, vice chairman of the China Securities Regulatory
Commission, said at a World Economic Forum meeting in the coastal
city of Tianjin.
"It may work with some small country," he said. "It doesn't work
with China." The new U.S. tariffs, he said, have "poisoned the
atmosphere for negotiations."
Voices have been rising in Chinese policy circles in recent
weeks saying that Beijing should wait to negotiate until after the
November midterm elections. Many Chinese officials think President
Trump isn't ready to cut a deal, is bashing China now to appeal to
his political base and may be more willing to negotiate after the
elections.
The $60 billion worth of U.S. goods China said last month it
would hit with retaliatory tariffs of 5% to 25% include farm
products, machinery and chemicals. The levies, if implemented,
would come on top of the tariffs on $50 billion in American goods
that are already in force, bringing the total amount of U.S.
products subject to Chinese tariffs to $110 billion -- or 85% of
U.S. goods entering China last year, according to U.S.
statistics.
Some Chinese officials advising the leadership are proposing to
restrict China's sales of materials, equipment and other parts key
to U.S. manufacturers' supply chains. If adopted, such a measure
could hurt companies like Apple Inc., which assembles most of its
gadgets in China, but also put millions of Chinese jobs in
jeopardy.
Many American companies operating in China are growing
increasingly worried about Chinese retaliation. In addition to
tariffs, more than half of member firms surveyed by the American
Chamber of Commerce in China earlier this month said they have
experienced a rise in nontariff barriers in recent months,
including increased inspections and slower customs clearance.
"Contrary to views in Washington, China can -- and will -- dig
its heels in and we are not optimistic about the prospect for a
resolution in the short term," William Zarit, a business consultant
and chairman of the chamber, said Tuesday.
Chao Deng in Tianjin and James T. Areddy in Shanghai contributed
to this article.
Write to Linling Wei at lingling.wei@wsj.com
(END) Dow Jones Newswires
September 18, 2018 09:05 ET (13:05 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.