Amid US-China trade tensions, Beijing urges reconciliation

China is looking to “resolve conflicts” in trade with the next US administration while now facing the increased likelihood of more tariffs being put in place, as advocated by US President-elect Donald Trump, according to a detailed report by South China Morning Post.

“China is willing to strengthen communication, expand cooperation and resolve conflicts with the United States by the principles of mutual respect, peaceful coexistence, and win-win cooperation,” Ministry of Commerce (Mofcom) spokeswoman He Yongqian said on Thursday afternoon – a day after the former US president’s return to power became clear following Tuesday’s election, the South China Morning Post report explained further.

She added that Beijing looks to “jointly promote the development of China-US economic and trade relations in a stable, healthy and sustainable direction that would benefit both countries and the world”.

During the same press conference, Mofcom confirmed that European Union officials arrived in Beijing on Saturday for “intensive trade negotiations” regarding EU tariffs on imported Chinese electric vehicles (EVs) that kicked in last week. The two sides had expressed intentions to talk, but it was not confirmed until Thursday.

Beijing could be facing extra pressure in trade following Trump’s election and at a time when it is already seeing tension growing in expanded fronts with some of its other trade partners.

Trump initiated a trade war with China during his first administration, from 2017-21, and the effects rippled through the global supply chain, spurring a shift that saw production lines diversify away from China.

During Trump’s election campaign, he said he would escalate current tariffs to 60 per cent on all Chinese imports, and add a 10 or 20 per cent blanket tariff on all foreign goods entering the US if granted another term.

Beijing has not directly responded to the possibility of increased tariffs from a new US administration but has condemned Washington for making “unilateralist and protectionist” moves with tariffs, and has retaliated with tariffs on some American imports.

The latest message from Mofcom follows President Xi Jinping’s congratulatory message to Trump on Thursday that included a call for “a stable, healthy and sustainable China-US relationship” as the world’s two largest economies have been engaging in wide-ranging competition in trade, security and tech in recent years.

Jayant Menon, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, pointed to the high probability that the incoming Trump administration will raise tariffs on China, but said that Trump’s willingness to subsidise domestic industries, like US President Joe Biden has done through the Chips Act, is “less clear”.

“China may be hoping that these programmes will be replaced by new tariffs, which would essentially mean a less protectionist, and therefore [less] harmful, outcome for China, and the world,” Menon said.

China wants free trade with no tariffs or restrictions ... it knows more are coming Chen Zhiwu, University of Hong Kong Yet, more tariffs have been imposed on China and are expected to be on the way from American allies and trade partners.

In recent months, the US, Canada and the EU have imposed tariffs on Chinese EVs, after accusing China of unfair competition because of heavy state subsidies in the industry.

While EU tariffs as high as 45.3 per cent kicked in last week, Beijing and Brussels are still exploring the possibility of how individual Chinese carmakers could adjust the price and volume of their imports for the European market, despite failing to reach solutions in previous rounds of talks in the past two months.

The two sides are engaging in a price-undertaking negotiation with a “pragmatic” and “balanced” approach, Mofcom’s He said on Thursday. There was no information about how long the talks would last.

“China wants free trade with no tariffs or restrictions,” said Chen Zhiwu, chair professor of finance at the University of Hong Kong. “But realistically, it knows more are coming, due to the threats to developed economies from China’s intrinsic economic system, the South China Morning Post report explained further.

“Officials in Beijing should continue to stress the importance of free trade for world prosperity and be a champion for globalisation even when the global political realities make it hard to restore.”

Market participants and investors will closely follow these developments and how relations between the top two leading economies in the world evolve. This will help them in taking informed investment decisions going ahead.