China willing to sit down at the bargaining table to avoid a trade war

China willing to sit down at the bargaining table to avoid a trade war

All of the concern over a nasty trade war with China may have been all for naught.

After several days of market uncertainty, on Monday, markets began edging upwards as investors are hopeful the U.S. and China can work through their tariff woes.

From CNBC:

China is willing to hold talks with the United States to resolve their differences over trade, China’s foreign ministry said on Monday, as alarm grows over a possible trade war between the world’s two largest economies.

Ministry spokeswoman Hua Chunying made the comments at a regular briefing in Beijing.

The U.S. administration last week sent a letter to Chinese economic overseer Liu He seeking a tariff cut on U.S. autos to help cut China’s trade surplus with the United States, the Wall Street Journal said, citing unnamed sources.

In the letter, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer said China should also buy more U.S. semiconductors and give U.S. firms greater access to the Chinese financial sector, the Journal said, quoting sources with knowledge of the matter.

In the past few days, fears of a trade war have mounted following U.S. President Donald Trump’s announcement on Thursday of plans for tariffs on up to $60 billion of Chinese goods.

Firing a retaliatory warning shot in response to separate U.S. tariffs on steel and aluminium, China declared plans to levy additional duties on up to $3 billion of U.S. imports.

On the campaign trail, Trump promised to be tough on China, saying repeatedly that the country was responsible for one of the “greatest thefts in the history of the world” in how they deal with trade with the U.S.

Trump was roundly mocked for saying so, but in the past few days, the press narrative has softened slightly. The WaPo praised Trump for “finally confronting China’s economic aggression”. They also suggest that this is just the first of coming policy changes that will loosen China’s stranglehold on trade and technology.

“Technology is probably the most important part of our economy,” U.S. Trade Representative Robert E. Lighthizer said Thursday. “And we concluded that, in fact, China does have a policy of forced technology transfer; of requiring licensing at less than economic value; of state capitalism, wherein they go in and buy technology in the United States in non-economic ways; and then, finally, of cybertheft.”

Lighthizer released the results of a months-long investigation by his office meant to form the basis of the new U.S. response. Its findings confirm what academics and the private sector have long known. His office estimates that Chinese illicit practices rob the U.S. economy of at least $50 billion annually. A bipartisan commission chaired by retired Adm. Dennis Blair and former Utah governor Jon Huntsman estimated the loss to the U.S. economy due to intellectual property theft overall to be between $225 billion and $600 billion annually. The commission’s 2017 report named China as the “principal IP infringer.”

The administration plans new tariffs and will bring a case against China at the World Trade Organization regarding discriminatory licensing practices. But officials told me that the real game changer is yet to come, saying that the administration will soon announce restrictions on Chinese investment in a range of technology and other critical sectors.

While the specific actions haven’t been finalized, expect executive actions aimed at preventing Chinese state-controlled companies from swallowing up U.S. technology firms, stopping U.S. companies from handing over key technologies to China and working to persuade other Western countries to do the same.

…“The Chinese are engaged in a fundamental attack on the principles of free trade,” said Derek M. Scissors of the American Enterprise Institute. “They are not close to free traders, so we are not obligated to abide by free trade. We are overdue to confront China on this.”

This may only be the beginning, but China’s willingness to avoid a trade war could bode well for the U.S.

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