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China won’t hold trade talks unless Trump stops threats

[WASHINGTON] China dashed prospects for a near-term resolution to the trade war with the US, warning President Donald Trump his threats of further tariffs are blocking any potential negotiations.

The response, which came just over an hour after the US imposed new duties on US$200 billion in Chinese goods on Monday, underscores a deepening gulf between both governments in a dispute that observers say is less about a row over a bilateral goods deficit and increasingly about a US desire to put the brakes on China's economic ascent.

Mr Trump has repeatedly threatened higher tariffs on the remaining Chinese imports should Beijing retaliate against Monday's round. As China has said that step is certain, the stage appears set for yet another escalation of the trade war. China cancelled talks that were scheduled for this week, and is digging in by prepping stimulus measures to cushion the economy.

"The door for trade talks is always open but negotiations must be held in an environment of mutual respect," according to a white paper carried by the state-run Xinhua News Agency. Negotiations "cannot be carried out under the threat of tariffs".

Whichever side is right, the hardening rhetoric is increasingly giving way to actions that are hurting the world economy, Fitch Ratings said in its latest global outlook.

"The trade war is now a reality," Fitch chief economist Brian Coulton said in the release. The ratings firm downgraded its world growth forecast for 2019 by 0.1 percentage point to 3.1 per cent and warned of further downside risks.

The latest round of US duties took effect just after midnight Washington time on Monday (midday in Beijing) on a list of products ranging from frozen meat to television components. China is poised to retaliate with tariffs on US$60 billion in US goods, a move that Mr Trump has said would spur new duties on another US$267 billion in Chinese imports.

In announcing the rates for the retaliatory duties last week, the government in Beijing said the tariffs would be effective as of 12.01pm local time on Sept 24.

If the president follows through on the escalation threat, US tariffs would cover all goods the nation imported from China last year, risking an escalating conflict that could upend the supply chains of multinational companies.

China on Saturday called off planned trade talks with US officials with a move by the US State Department to sanction China's defence agency and its director on Thursday contributing to the decision, according to people familiar with the situation. There's a growing consensus in Beijing that substantive talks will only be possible after US mid-term elections in November, the people said.

Efforts at diplomacy have failed, with no breakthroughs since high-level talks began in May. Mr Trump has warned that the 10 per cent tariffs on US$200 billion in Chinese goods will rise to 25 per cent in January if Beijing refuses to offer concessions.

Still, the US remains open to talks, Lindsay Walters, deputy White House press secretary, said.

"President Trump has an excellent relationship with President Xi and our teams have been in frequent communication since President Trump took office," Ms Walters said. "We remain open to continuing discussions with China, but China must meaningfully engage on the unfair trading practices."

Neither side has backed down since the tit-for-tat tariff war began in July when the US imposed duties on US$34 billion of Chinese goods. Another US$16 billion of goods were included in August and China retaliated in kind to both moves.

Companies complain that the time frame between the announcement of the latest levies and implementation of the tariffs on thousands of products is too short. A protracted trade war will fuel inflation in the US, particularly as tariffs are added to categories such as furniture, apparel and technology, according to analysts at Bloomberg Intelligence.

"Retailers are already facing a tidal wave of tariffs. This latest tranche is a tsunami," said Hun Quach, vice-president of international trade for the Retail Industry Leaders Association. "With thousands of consumer products included, little warning, and no time to prepare, businesses are left scrambling."

Beijing's latest tariffs include an additional 5 per cent duty on about 1,600 kinds of US products including computers and textiles and an extra 10 per cent on more than 3,500 items including chemicals, meat, wheat, wine and liquefied natural gas.

Asked this month if Beijing's planned retaliation was a guarantee that Mr Trump would go ahead with the next round of duties, White House trade adviser Peter Navarro said on NPR's Morning Edition that "the president was crystal clear in his statement: if China retaliates, the process will move forward on the additional amount".

Edward Alden, senior fellow at the Council on Foreign Relations, said there was a chance the trade war could spiral out of control but that there is "a window for serious negotiation".

"The Trump administration must get its position straight though - what does it want from China, and who is empowered as a negotiator by President Trump to bring the deal home? Unless that happens, serious negotiations will be impossible and the likelihood of continued escalation increases," Mr Alden said.