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China defiant toward US on trade, Kudlow urges strong enforcement steps

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The US and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law, and Beijing said it would not swallow any "bitter fruit" that harmed its interests.

[WASHINGTON] The US and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law, and Beijing said it would not swallow any "bitter fruit" that harmed its interests.

The trade war between the world's top two economies escalated on Friday, with the US hiking tariffs on US$200 billion worth of Chinese goods, after President Donald Trump said Beijing "broke the deal" by reneging on earlier commitments made during months of negotiations.

White House economic adviser Larry Kudlow told the "Fox News Sunday" programme that China needs to agree to "very strong" enforcement provisions for an eventual deal, and said the sticking point was Beijing's reluctance to put into law changes that had been agreed upon. Mr Kudlow said the US tariffs would remain in place while negotiations continue.

Beijing remained defiant.

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"At no time will China forfeit the country's respect, and no one should expect China to swallow bitter fruit that harms its core interests," said a commentary, due for Monday publication, in the Chinese ruling Communist Party's People's Daily.

It said Beijing was open to talks, but would not yield on important issues of principle.

On Sunday, Mr Trump sought to portray the US as being in an advantageous position.

"We are right where we want to be with China," Mr Trump wrote on Twitter, saying US purchasers of Chinese goods could either buy them from domestic manufacturers or from other nations.

Mr Trump also repeated an erroneous statement that the US would be taking in "Tens of Billions of Dollars in Tariffs from China."

The tariffs are not paid by the Chinese government or by firms located in China. They are paid by importers of Chinese goods, usually American companies or the US-registered units of foreign companies. These often pass on the costs to customers, mostly manufacturers and consumers in the US.

Mr Kudlow, when asked who was paying, said "both sides will suffer on this," contradicting Mr Trump, although he added that the US economy should be able to cope.

"We're in terrific shape in order to correct 20 years plus of unfair trading practices with China," Mr Kudlow said. "...This is a risk we should and can take without damaging our economy in any appreciable way."

G20 SUMMIT

Mr Kudlow said there is a "strong possibility" that Mr Trump will meet Chinese President Xi Jinping at a G20 summit in Japan in late June.

Until last week, there were expectations Mr Trump and Mr Xi would sign a trade deal at the summit. However, the trade talks suffered a major setback last week when China proposed extensive revisions to a draft agreement. Beijing wanted to delete prior commitments that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.

Vice-premier Liu He, China's top economic adviser, sought to defend the changes in talks with senior US officials in Washington on Thursday and Friday, arguing that China could accomplish the policy changes through decrees issued by its State Council, or cabinet, sources familiar with the talks said.

US Trade Representative Robert Lighthizer rejected that, telling Mr Liu that the US was insisting on restoration of the previous text.

"We would like to see these corrections in an agreement which is codified by law in China, not just a State Council announcement. We need to see something much clearer. And until we do we have to keep our tariffs on," Mr Kudlow said.

China strongly opposes the latest US tariff hike, and must respond to that, Mr Liu told reporters on Saturday.

Mr Kudlow said on Sunday he expected retaliatory tariffs to kick in but that it had not yet happened.

Mr Trump has ordered Mr Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect about an additional US$300 billion worth of goods.

Mr Lighthizer said a final decision on that has not yet been made, but it would come on top of the Friday tariff rate increase to 25 per cent from 10 per cent on US$200 billion worth of Chinese imports.

US farmers, a key constituency of Mr Trump, have been among the hardest hit in the trade war, with soybean shipments to China dropping to a 16-year low in 2018.

REUTERS