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Trade war 'certainly' hurting China economy: US official

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Mr Ross says the easiest fix for the US-China trade gap is for the US to raise fuel exports, but structural reforms would be much harder.

Washington

CHINA'S economy is more vulnerable to the fallout in the current trade stand-off with Washington and has already been hurt by the dispute, US Commerce Secretary Wilbur Ross said on Monday.

His remarks underscored President Donald Trump's confidence that the robust US economy means Washington can outlast Beijing in a test of wills over trade.

Mr Ross told CNBC: "It certainly has hurt the Chinese economy. What this whole trade thing is about is they export several times as much to us as we export to them. So what we have at risk is a very small amount both absolutely and because our economy is bigger than theirs."

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Senior US officials were in Beijing on Monday for the first face-to-face negotiations since Mr Trump agreed to a 90-day ceasefire with China's leader Xi Jinping on Dec 1. The negotiations are aimed at resolving US allegations of unfair trade practices, including massive state subsidies and "theft" of American technological know-how.

Economic data show that the Chinese economy has suffered since last year, when Mr Trump slapped stinging tariffs on more than US$250 billion in Chinese imports.

Asked if he was happy or concerned about the slowing in the world's second largest economy, Mr Ross replied: "Not happy nor guilty. We expected this would happen." But he said "what has changed is China now understands how independent they are on us."

However, signs are emerging of an increasing toll on US industry as well. US manufacturing activity in December had its biggest drop since the global financial meltdown of 2008. Without a resolution, punitive US duty rates on US$200 billion in Chinese goods are due to rise to 25 per cent from 10 per cent on March 2. Analysts say Washington's complaints imply far-reaching changes to Beijing's industrial policies, but Mr Ross said there was a "very good chance" of reaching an agreement, although monitoring compliance would present a challenge.

Righting the yawning trade imbalance with China, possibly involving more US fuel exports, would be "easiest," he said; structural reforms would be "much harder" because "that's about intellectual property rights and market access and all kinds of things on the list of 142 things we submitted to them many months ago".

The hardest would be a formal agreement, he said, "but the history here has not been so good on compliance", so enforcement mechanisms will require teeth.