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Trump needs to curb China trade rhetoric: ex-Mnuchin aide

2020 election could bring needed moderation by US, former Treasury official says

American rhetoric toward China has grown too harsh, said Craig Phillips, who served as counselor to Treasury Secretary Steven Mnuchin until June.   © Reuters

NEW YORK -- Washington's trade rhetoric on China has "gotten way out of control," but the upcoming presidential election might inject some moderation into the dialogue, a former top aide to U.S. Treasury Secretary Steven Mnuchin told the Nikkei Asian Review.

"I do think the administration has to change the tone of the negotiation" to straighten out trade relations with Beijing, Craig Phillips said in an interview Sunday on the sidelines of the Chinese Finance Association annual conference here.

"If we have four more years of President [Donald] Trump, I think we'll have four more years of tension unless this strategy changes."

Phillips, who served as a counselor to Mnuchin until June, oversaw the Trump administration's work on banking regulations.

Trump was "elected on the issue" of trade relations with China, and his personality suggests the president would stick with the approach that he pledged, Phillips told Nikkei. But "in a second term, he would have some flexibility to moderate it."

"You'll get a lot of feedback from the American people that they're not really sure [the trade war] is good for them," Phillips added. "I think during the election he might be forced to come to grips with it."

The former aide's remarks came days after Trump denied having agreed to roll back existing tariffs on Chinese goods, disputing earlier statements from both Chinese and American officials reporting a tariff deal.

"They'd like to have a rollback. I haven't agreed to anything," Trump told reporters on Friday, casting uncertainty over a so-called phase one trade deal expected to be inked before end of this year. The president also accused China of devaluing its currency and maintained that Beijing "would like to make a deal much more than I would,"

Earlier at the conference on Sunday, Phillips said that an aggressive, unilateral response to a trade deficit -- such as the U.S. deficit with China -- is "missing the point" about the complexity of the global supply chain. 

He added that undertaking a capital war with China could lead to "tremendous unintended consequences."

"If Secretary Mnuchin were here, I'd tell him that's a terrible idea," Phillips said of the reported proposal to restrict capital flows between the U.S. and China. "If you limit the movement of capital, you're really just cutting off your nose to spite your face."

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