China expected to retaliate over Trump tariff hike, economic adviser says


The US expects China to retaliate over the Trump administration's latest tariff hike, chief economic adviser Larry Kudlow said on Sunday.

"The expected countermeasures have not yet materialized," Larry Kudlow told Fox News Sunday. "We may know more today or even this evening or tomorrow."

As markets digested the comments, futures trading pointed to a drop in Wall Street stocks on Monday while Asian shares slipped in early trade.

Talks ended on Friday and Trump raised the spectre of a full-blown trade war when he ordered that tariffs on Chinese imports worth around $200bn be raised from 10% to 25%.

Beijing retaliated for previous tariff hikes by raising duties on $110bn of US imports. Chinese officials have also targeted US companies by slowing customs clearance and stepping up regulatory scrutiny.

On Saturday he had tweeted saying Beijing had deliberately sought to delay negotiations. "China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky [and] have a Democrat win," he said.

Kudlow told Fox no more talks were planned but also said there was a "strong possibility" Trump and Chinese president Xi Jinping "will meet in Japan at [the] G20" summit at the end of June.

In China, state media said the door to talks was always open but China would not yield on important issues of principle. In a commentary carried by the official Xinhua news agency, the ruling Communist Party's People's Daily said there are no winners in any trade war and China did not want to fight but would not be afraid to do so.

China and the US are sparring over allegations that China steals technology and pressures US companies into handing over trade secrets, as part of a campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries.

Kudlow said China had not implemented changes Washington wanted, including strong enforcement provisions on issues such as forced technology transfer and intellectual property.

"We have to have a very strong agreement," he said, "to correct, to right these wrongs before we will be satisfied".

Kudlow also said Trump's plan to raise tariffs across the board could take "a couple of months. Call it three months. I don't know. That will take some time and then of course the president's going to have to make the final decision on that."

The face-off with China has proved tricky political territory for Democrats, given Trump's framing of his stance as a defence of American workers.

On Sunday the California senator Kamala Harris, a leading contender for the presidential nomination, was asked on CNN's State of the Union if she agreed with Senate minority leader Chuck Schumer, who this week told Trump he should "hang tough" in his dispute with Beijing.

Harris dodged the question, choosing instead to criticise Trump for not working with allies and for "conducting trade policy, economic policy, foreign policy by tweet".

"That's irresponsible," she said. "It is a display of a president who thinks that unilateral action is better than working with the friends to address issues that not only impact our country, but impact the globe. And I think it puts us in a weaker position."

Continuing his Twitter thought on Saturday, Trump said "the only problem" with China's approach to talks "is that they know I am going to win (best economy & employment numbers in US history, & much more), and the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!"

Many observers have suggested Trump seems not to understand the economic impact of tariffs. One study released this week said that as companies which import steel absorb the cost of tariffs by passing it on to their customers, American consumers and businesses are paying $900,000 a year for every job created or saved by the US action.

On Sunday evening Trump returned to Twitter to claim the US was "right where we want to be with China", and would "be taking in tens of billions of dollars in tariffs from China". He added that "buyers of product can make it themselves in the USA (ideal), or buy it from non-tariffed countries".

In a confused pair of tweets, the president also claimed the US would "spend (match or better) the money that China may no longer be spending with our Great Patriot Farmers (Agriculture), which is a small percentage of total tariffs received, and distribute the food to starving people in nations around the world! GREAT! #MAGA".

On Sunday, Kudlow conceded to Fox that China does not actually "pay" tariffs, but claimed "the Chinese will suffer GDP losses and so forth with respect to a diminishing export market".

On Sunday the Republican Kentucky senator Rand Paul warned that Trump's policies could damage his claim to the "best economy in US history", a key line of attack as the 2020 election approaches.

Speaking to ABC's This Week, Paul advised the president to finalise a deal with China soon, "because the longer we're involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it".


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