China is ramping up talk of a trade war, and it could come back to blow up in Trump's face

Mark Wilson/Getty ImagesPresident Donald Trump.

  • The Trump administration this week said tariffs on $US50 billion worth of Chinese goods would go forward, even after the two countries reached a preliminary trade deal.
  • The Chinese government blasted the decision and said “we aren’t afraid of fighting” a trade war.
  • Analysts speculated that the move could be an attempt to put pressure on China before a visit by Commerce Secretary Wilbur Ross.
  • But they said the move could also backfire.

The up-and-down relationship between President Donald Trump and the Chinese government has hit another rough patch, and experts say the US president is skating on thin ice.

The Trump administration on Tuesday said it would go ahead with tariffs on $US50 billion worth of Chinese goods and other restrictions on investment from China into the US. The Chinese government shot back at the decision in a terse statement Wednesday.

“We want to reiterate that we don’t want a trade war, but we aren’t afraid of fighting one,” the Chinese Foreign Ministry spokeswoman Hua Chunying said.

The administration’s announcement represented a major turnaround from an agreement the two countries struck earlier in May. In that agreement, the US promised to delay the tariffs indefinitely in exchange for China’s promise to buy more American goods and reduce the bilateral trade imbalance.

But after criticism, Trump publicly conveyed his second thoughts about the deal. The administration’s sudden shift this week appeared to annoy the Chinese government, which ramped up its rhetoric.

“If the US insists on acting arbitrarily and recklessly, China will take firm and powerful measures to safeguard its own legitimate rights,” Hua said.

US officials also got in on the tough talk. Peter Navarro, Trump’s hawkish anti-China trade adviser, told NPR on Wednesday that Treasury Secretary Steven Mnuchin’s suggestion that the trade war was “on hold” was “an unfortunate sound bite.”

“It’s a trade dispute, plain and simple,” Navarro said.

A risky gamble for concessions from China?

Many analysts suggested that Trump’s decision to push forward with the tariffs despite reaching a preliminary deal was a gambit to gain leverage heading into Commerce Secretary Wilbur Ross’s trip to Beijing this weekend.

“The planned tariffs and investment restrictions are aimed at regaining domestic and international political leverage after a series of odd trade policy reversals,” said Gregory Daco, the chief US economist at Oxford Economics.

Ross is headed back to China to try to lock down long-term deals for the Chinese to buy goods from US companies.

“You can’t go soft too quickly or you are not going to get where you want to go,” a senior administration official told Politico.

But experts said the back-and-forth on trade policy could eventually strain China’s patience and come back to bite Trump. Isaac Boltansky, a policy analyst at the research and trading firm Compass Point, said it would be difficult for Ross to extract further concessions.

“Our sense is that this announcement was intended to manufacture a modicum of negotiation leverage in advance of Commerce Secretary Ross’ visit to China later this week, but the utility of these theatrics is questionable given the known contours of the debate,” Boltansky wrote in a note to clients.

Ely Ratner, the vice president at theCenter for a New American Security who previously served as deputy national security adviser to Vice President Joe Biden, said the Chinese government saw the back-and-forth as a sign the US did not have a unified front in the talks.

“Chinese officials and analysts here all think Trump is bluffing,” Ratner tweeted Wednesday. “Frequent policy reversals being read as lack of US resolve.”

In fact, according to The Wall Street Journal, the commerce secretary’s trip to China could already be in jeopardy because of the announcement. Ross’ advance team reportedly hit a wall with its counterparts following the tariff decision, and unless an agenda for the talks is agreed upon, there may be no trip at all.

In public, China also suggested that the flip-flopping from the Trump administration could be damaging to the future talks.

“In international relations, an about-face or constant change of positions is bound to damage or squander a country’s credibility,” Hua said.

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