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Trade war

US slams China for backpedaling and says tariffs will go up

Beijing's trade negotiators to visit Washington on Thursday and Friday

U.S. President Donald Trump speaks while meeting with China's Vice Premier Liu He in the Oval Office on April 4. Trump has threatened to raise tariffs on Chinese goods ahead of his scheduled meeting with Liu this week.    © Reuters

SHANGHAI/BEIJING/NEW YORK -- The lead U.S. trade negotiator said Monday that the Chinese delegation had reneged on early promises over the past week and that tariffs on more imports from China will be raised to 25% from 10% on Friday.

The about-face by China is "unacceptable," U.S. Trade Representative Robert Lighthizer told reporters in Washington.

"Over the course of the last week or so we have seen ... an erosion in commitments by China," Lighthizer was quoted as saying. He said China had retreated from specific commitments -- a move that would have led to substantive changes in the text of the deal the two sides have been working on.

A Chinese delegation is expected to visit Washington on Thursday and Friday, Lighthizer said. China's commerce ministry said on Tuesday that Vice Premier Liu He would be there for the talks.

The U.S. trade negotiator's announcement came hours after China said it would send a delegation as planned despite U.S. President Donald Trump's abrupt threat Sunday to impose additional tariffs on Chinese imports. If carried out, the threat would see tariffs go up at 12:01 a.m. Friday.

After an hourslong pause in which Chinese state media did not report on the Trump tweet, Beijing decided to avoid a head-on confrontation and keep the trade talks on track for now.

Foreign Ministry spokesperson Geng Shuang on Monday had refused to give a timeline for the visit or say whether Liu would attend, reflecting the frantic adjustments Beijing was forced to make after the bombshell tweet by Trump. "I would refer you to the competent authority," he repeated when pressed to give a date.

"We hope that the U.S. and China will work together to meet each other halfway and reach a win-win agreement based on mutual respect," Geng said.

"What I can tell you is that the Chinese team is preparing to travel to the U.S. for trade talks," he said.

On Sunday, Trump expressed unhappiness with the state of U.S.-China trade talks on Twitter. "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" he tweeted.

Trump on Monday slammed China over its trade practices, saying the U.S. was losing billions to Beijing and vowing to protect American commerce, escalating tensions following his weekend threat to hike tariffs.

He had said that the U.S. will raise tariffs on $200 billion worth of Chinese goods to 25% from 10% from Friday, signaling frustration over the lack of progress in bilateral trade talks.

Chinese Vice Premier Liu He, right, poses with U.S. Treasury Secretary Steven Mnuchin, center, and U.S. Trade Representative Robert Lighthizer, left, before they proceed to their meeting at the Diaoyutai State Guesthouse in Beijing on May 1, 2019. Lighthizer and Mnuchin on Monday said if no agreement is reached, the U.S. will impose additional tariffs on Chinese goods.    © Reuters

The threat comes at a challenging time for Chinese President Xi Jinping. June 4 marks 30 years since the crackdown on student protesters in Tiananmen Square -- a day Beijing will be on high alert for. October marks the 70th anniversary of modern China's founding, and Xi wants the nation in a celebratory mood.

Communist Party elders are said to be especially unhappy about the deterioration of ties with the U.S. and also opposed to wholesale compromise in the trade talks. Xi's plan of reaching a trade deal ahead of the Tiananmen anniversary looks to be heading back to the drawing board.

Research company Enodo Economics said Trump's tweet reflects America's seriousness on signing a meaningful deal with China. Trump pointed to existing punitive tariffs, including a 25% import tax imposed on $50 billion worth of technology-related goods from China, as being "responsible for our great economic results."

Diana Choyleva, Enodo chief economist, said: "Given the overt serious pressure Trump is putting on Xi Jinping, America would also have to be prepared to drop the tariffs in return so that the Chinese president can show at home that he hasn't bowed to U.S. pressure."

Geng said it was not the first time that Trump threatened China with extra tariffs. Hu Xijin, editor-in-chief of Chinese state media Global Times, toed the official line and tweeted that China "won't buy this trick."

The president also tweeted Sunday he would "shortly" impose a 25% tariff on the remaining $325 billion worth of Chinese goods that are currently not subject to punitive duties.

Trump said as recently as Friday that talks were going "very well." Hopes of a deal to end trade tensions had buoyed U.S. stocks. But this new threat could drive Beijing to take a harder line, further prolonging the trade war and putting international supply chains at risk, with potentially severe consequences for the global economy.

Gavekal Research described Trump's statements as "last-minute theatrics" to appease critics that Washington was not drawing enough from Beijing just as the bilateral talks move into their 11th round Wednesday.

"The most likely outcome is that a deal will still be done, but it will take a bit longer," wrote analyst Arthur Kroeber in a note.

"The main reason is that global markets have priced in a deal, so a failure of the talks will trigger a massive sell-off," Kroeber argued.

Wendy Cutler, a former senior U.S. trade diplomat, said: "The Trump administration has resorted to one tactic -- threat of tariff increases -- to break the impasse. While this tactic has met with some success to date, the latest threat is high-stakes and one that could lead to greater harm to the U.S. than China if we lose the market-opening that China has put on the table and face high tariffs on many products, coupled with counterretaliation by China."

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