Steve Mnuchin is scrambling to head off Trump's possible trade war with China

  • President Donald Trump said Treasury Secretary Mnuchin will go to China in the coming days.
  • The meeting will come amid increased tensions due to new tariffs and trade restrictions.

President Donald Trump on Tuesday said Treasury Secretary Steven Mnuchin will head to China in the coming days as the administration attempts to repair the fraying trade relationship between China and the US.

Mnuchin suggested over the weekend that a trip to China was possible. Many analysts believed the move could be the first step on the path to fixing the Sino-American economic relationship.

“You know we’ve put on very serious tariffs and those will continue unless we make a trade deal,” Trump said of the trip during a White House meeting with French President Emmanuel Macron. “I think we’ve got a very good chance of making a deal.”

The trip is set to come after two months of growing trade tensions between the US and China.

The two countries announced tariffs on $US50 billion worth of goods from the other. Trump also has suggested another set of tariffs on $US100 billion worth of Chinese goods could be on the way.

Trump has also imposed restrictions on the Chinese technology firm ZTE’s investment into the US, and he is apparently considering additional limits on Chinese firms investing in the US, particularly in American technology companies.

The tit-for-tat moves have caused some economists to warn about the possibility of a trade war, which could be economically harmful for the US, lead to higher prices for consumers, and result in a recession.

Chinese officials have warned that while a trade war was not the optimal outcome, the country was prepared to go down that path if necessary.

In an effort to deescalate the rising tensions, Mnuchin on Saturday met with Yi Gang, the governor of the People’s Bank of China, at the International Monetary Fund’s spring meetings. During that meeting, Mnuchin said the two sides had begun a “dialogue” on trade.

“We’re cautiously optimistic to see if we can try to reach an agreement,” Mnuchin said.

In a statement Sunday, the Chinese commerce ministry said it was open to a visit from Mnuchin.

“The Chinese side has received information that the US side hopes to come to Beijing to discuss economic and trade issues,” the statement said. “China welcomes this.”

Ed Mills, a policy analyst at Raymond James, said negotiations represent a good first attempt at preventing a trade war but do not guarantee success.

“Negotiations between the two sides may set the stage for compromise on some issues, but it will be difficult to settle all issues in the short-term,” Mills said in a note to clients on Tuesday.

Trump said later Tuesday that he believes the trade dispute with China will “work out.”

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