Why White House approach to China talks may backfire

America’s traditional allies are desperately seeking new friends as US President Donald Trump hails the leaders of North Korea and China instead but may have to rely on themselves to ride out the storm analysts said. — Reuters pic

China highlighted the sensitivity of the issue with its threat Sunday to scrap deals aimed at settling a trade dispute with Washington if President Donald Trump's tariff hike on $50 billion of Chinese technology goods goes ahead.

Following Chinese Vice Premier Liu He's talks with Ross, China referred instead to a consensus reached last month in Washington, when China agreed to increase significantly its purchases of USA goods and services. The resulting outcry and threat of retaliatory tariffs by Canada, Mexico, and the European Union gave Beijing cover to do nothing.

"The achievements reached by China and the United States should be based on the premise that the two sides should meet each other halfway and not fight a trade war", said the Chinese statement, carried by the official Xinhua News Agency.

Canada and Mexico, which are embroiled in talks with the United States to update the North American Free Trade Agreement, responded to the move by announcing levies of their own on a variety of US exports.

The U.S. officials pressed their Chinese counterparts to commit to multiyear purchase agreements, thinking such pacts could be useful in prodding China to significantly lower tariffs and ease regulations and other barriers to imported goods. Apart from reducing the huge trade imbalance, USA officials want Beijing to move away from industrial policies that they say subsidize Chinese companies on the global stage and pressure foreign firms to hand over key technologies.

All three have plan to retaliate with their own tariffs on USA goods, stoking fears of an escalating conflict.

China reiterated in the statement that its attitude has been consistent and it is willing to increase imports from numerous countries around the world, including the USA, to meet the Chinese people's growing demand for a better life and the requirements of high-quality economic development.

Mr Ross was accompanied by agriculture, treasury and trade officials for the meeting at the Diaoyutai State Guesthouse, a leafy compound on Beijing's west side.

Ross and Liu held a working dinner Saturday ahead of their talks.

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He also said he believes Trump's tariffs are a negotiating tactic, noting the USA and Canadian steel industries work "hand and fist together" and that "if you hurt one, the other is going to get hurt".

Trump's decision to end tariff exemptions for Canada, Mexico and Europe (including France) comes only 37 days after Macron visited him in Washington and warned him that the protectionist move could have dire consequences.

The tariffs are meant to pressure Beijing for allegedly stealing trade secrets and forcing foreign companies to hand over technology in exchange for access to the Chinese market.

And that meant Ross arrived in Beijing on Saturday under a cloud and amid anger from key the United States allies who have been hit with duties on steel and aluminum.

Trump has infuriated European Union members, Canada and Mexico by imposing tariffs of 25 percent on steel and 10 percent on aluminum, ending months of uncertainty about potential exemptions and suggesting a hardening of the USA approach to trade negotiations.

The state-run Chinese newspaper Global Times contended in an editorial that, "Tariffs and expanding exports - the United States can't have both".

"Both sides appear to have hardened their negotiating stances and are waiting for the other side to blink", said Eswar Prasad, professor of trade policy at Cornell University.

On Saturday, Washington's main allies delivered a unified message of shock and dismay at a Group of Seven ministerial meeting, urging President Trump to rescind the punishing metal tariffs.

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