China will not be content to only play defence in an escalating trade war with the United States, a widely read Chinese tabloid warned, as President Donald Trump was expected to announce new tariffs on $200 billion in Chinese goods as early as Monday.

Beijing may also decline to participate in proposed trade talks with Washington later this month if the Trump administration goes ahead with the additional tariffs, the Wall Street Journal reported on Sunday, citing Chinese officials. It reported quoted one senior Chinese advisory official saying China would not negotiate “with a gun pointed to its head”.

The United States and China have already levied duties on $50 billion worth of each other’s goods in an intensifying row that has jolted global financial markets in the past few months.

Last week, the world’s two biggest economies appeared to be making progress on the trade snag after the US Treasury Department invited senior Chinese officials including Vice Premier Liu He for more talks. However, a senior administration official told Reuters over the weekend that Trump is likely to announce the new tariffs as early as Monday.

‘Beautiful counter-attack’

“It is nothing new for the US to try to escalate tensions so as to exploit more gains at the negotiating table,” the Global Times , which is published by the ruling Communist Party's People's Daily , wrote in an editorial on Monday. “We are looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the US,” the Chinese-language column said.

Besides retaliating with tariffs, China could also restrict export of goods, raw materials and components core to US manufacturing supply chains, former finance minister Lou Jiwei told a Beijing forum on Sunday, according to an attendee. Lou is chairman of the National Council for Social Security Fund.

One person, who attended the event and is familiar with the White House's thinking, said such a move would likely attract sharp retaliation from Washington, which has studied its own limits on exporting key technologies to China. “Lou Jiwei's approach would feed the most hawkish sentiments in the US government,” the person said, declining to be identified given the sensitivity of the matter.

Trump has demanded that China cut its $375 billion trade surplus with the United States, end policies aimed at acquiring US technologies and intellectual property and roll back high-tech industrial subsidies.

Anxiety and uncertainty

Repeated Chinese vows to reform what critics have argued is one of the world's most restricted markets among major economies have in recent years triggered "promise fatigue" among foreign business groups that viewed changes as piecemeal.

Trump has said he will no longer allow China to take advantage of the United States on trade, though opposition to escalating tariffs has swelled in recent weeks within US business circles.

Michigan Governor Rick Snyder, known as a moderate Republican and a former computer executive, told Reuters on a trip to China that the anxiety and uncertainty around tariffs risked limiting Chinese investment in the United States.

"If you don't know what the rules are or how it's going to operate, you are going to be fairly hesitant about making that investment," said Snyder, who was in China to promote his state's industries, including autonomous vehicle technology.

There was likely to be a "lagging effect" from US trade disputes with China, Canada and Mexico that could undercut the positive impacts of Trump's tax cuts, he said. "I would encourage the national governments to resolve it as quickly as possible, because it's a concern for all."

 

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