Beijing warns of tit-for-tat trade war if Trump imposes tariffs on China goods

 

Senior Chinese officials have warned the US that Beijing is ready to retaliate if Donald Trump’s administration imposes new tariffs, highlighting the risk of a destructive trade war between the world’s two largest economies.

Penny Pritzker, the outgoing US commerce secretary, told the Financial Times that Chinese officials had informed US counterparts after November’s election that they would be forced to respond to trade measures taken by the new administration.

“The Chinese leadership said to me ‘If you guys put an import duty on us we are going to do it on you’,” Ms Pritzker said. “And then they said ‘That will be bad for both of us’.”

She said the next administration needed to decide “the fine line between being tough and a trade war”, cautioning that such a confrontation would have “enormous consequence” for the US.

The move highlights the concern in China over the risk to relations presented by Mr Trump, who has also offended Beijing by breaking with traditional US policy on Taiwan.

Japanese officials also pushed back against Mr Trump, warning yesterday of fallout for US-Japanese trade and investment if the president-elect followed through on his call to impose a border tax on Toyota to stop the carmaker from building a plant in Mexico.

Mr Trump has put a tougher stand on trade at the centre of his economic policy, appointing a team of China hawks and avowed protectionists to oversee his trade policy. He has pledged to label China a currency manipulator and threatened to impose tariffs of up to 45 per cent on Chinese goods.

Mr Trump and his advisers argue that since China’s 2001 entry into the World Trade Organisation it has been competing unfairly and has caused the loss of millions of US jobs, particularly in manufacturing.

But Ms Pritzker, who was due to meet Wilbur Ross, her successor, yesterday, said Mr Trump’s zero-sum view of China as simply stealing US jobs was “too simple a characterisation”. She argued that Chinese policy was focusing on developing domestic industry to take the place of imports. She also warned that a recent boom in foreign direct investment in the US could be vulnerable to any increase in protectionism, saying the US should not take its top spot “for granted”.