Washington, Beijing flexing muscles in trade dispute

[WASHINGTON] The temperature is rising between the United States and China but the simmering confrontation has not yet boiled over into a trade war, since the tit-for-tat countermeasures so far have been confined to a few specific products.

Beijing on Monday imposed tariffs on 128 American goods, retaliating for President Donald Trump's decision last month to slap import duties of 25 per cent on steel and 10 per cent on aluminum.

Washington was primarily targeting China which has long been accused of flooding the global market with the metals, but the tariffs hit US allies as well, prompting Mr Trump to exempt several countries, including major producers Mexico and Canada.

Mr Trump has repeatedly accused China of unfair trade practices he says harm US businesses and swell the bilateral trade deficit. But the country accounts for less than 3 per cent of US steel imports.

Beijing retaliated by targeting US pork, recycled aluminum, nuts, fruits and wine, but for the moment has left the most sensitive areas like soybeans or Boeing aircraft untouched.

Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, notes that China's response Monday was "symbolic".

"They've done nothing on sorghum. They've done nothing on soybeans," she told AFP, adding that China's response mirrored Mr Trump's moves.

And Beijing has not yet responded to White House plans announced March 23 to impose tariffs on US$60 billion worth of other Chinese exports in retaliation for the alleged theft of US intellectual property.

Even so, "They sent a very clear signal that China is going to respond quickly and in time to any US trade action," Edward Alden, a trade expert at the Council on Foreign Relations, told AFP.

Mr Alden noted that the response marked the first retaliation by any country since Trump announced the metal tariffs last month.

The European Union has held its fire - despite announcing a list of goods that will be targeted with punitive duties - while South Korea made deep concessions in renegotiating the Korea-United States Free Trade Agreement, yielding under the pressure of Trump's threatened metals tariffs.

'CHINA IS NOT KOREA'

"The US is the biggest market in the world and Mr Trump believes that other countries will make concessions in order to keep that access. Korea is willing to do that," Mr Alden said.

But, while Seoul has so far been willing to negotiate, the final response from Beijing remains an unknown Ms de Bolle said.

"China is not Korea." And Beijing has options. It could choose to import pork from Brazil or Argentina, and it could likewise find other suppliers for soy, even if China currently relies most heavily on American producers.

Ironically, the world's largest pork producer, US-based Smithfield Foods, has been Chinese owned since 2013.

Ms de Bolle said Beijing likely believes it has greater a capacity to inflict pain on the United States than vice versa.

But pressure is mounting on Mr Trump as metal prices begin to rise - something Commerce Secretary Wilbur Ross predicted would be painless for most businesses and consumers.

Timothy Fiore, who oversees a monthly survey of the US manufacturing companies for the Institute of Supply Management, said Mr Trump's new tariffs were driving up supply costs for manufacturers which use steel and aluminum.

Suppliers began raising their prices within 24 hours after Mr Trump announced his intention to impose the tariffs - with the price now up a sharp 19 per cent at US$860 a ton, Mr Fiore said.

Growth in the manufacturing sector could slow if trade tensions between the world's two largest economies continue to mount, he told reporters in presenting ISM's March survey results.

But Ms de Bolle noted that talks are continuing between Washington and Beijing.

"We are certainly close to the brink of a trade war, but it does not mean there will be trade war."

AFP