China's Trade Surplus With the US hits record high

Frederick Owens
July 17, 2018

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Tusk spoke at a news conference with China's No. 2 leader, Premier Li Keqiang, following an annual EU-Chinese economic summit also attended by the president of the European Commission, Jean-Claude Juncker.

Though Beijing has ordered state media to downplay the trade war and refrain from insulting U.S. President Donald Trump-as reported by Reuters and South China Morning Post-the official response has been aggressive in reprimanding the United States and denying that China has engaged in unfair trade practices.

China has sworn to retaliate at each step.

China added that it doesn't want a trade war - but that it is not afraid of having one. "It knows how to open up". But he added a hint of European Union impatience, noting that "if China wishes to open up it can do so".

Airbus complained about delays in government approvals that had "caused a great loss" for the company, and BMW sought its greater inclusion in the creation of industry standards.

China's commerce ministry confirmed last month that Chinese exporters were front-loading exports to the United States to get ahead of expected tariffs - a situation that could exacerbate any slowdown in shipments toward the year end. The pool report did not make clear if any companies came forward.

US Trade Representatives Robert Lighthizer said retaliatory duties on US exports imposed by China, the EU, Canada, Mexico and Turkey were completely without justification under global rules. "The intensifying trade conflict with the U.S. will start to weigh on growth", said Louis Kuijs, head of Asia Economics at Oxford Economics in Hong Kong.

Also, Beijing's "Made in China 2025" initiative, an ambitious plan to close the Asian giant's technology gap with the West, is viewed as exploitative by many in the EU. So far China has responded in kind, adding tariffs to $34bn of goods from the USA and threatening "firm and forceful measures" to match the threat of tariffs on $200bn worth of United States exports.

The WTO is an global body that adjudicates trade disagreements between member nations.

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The China-EU meeting produced a communique affirming the commitment of both sides to the multilateral trading system. Leaders failed to find sufficient consensus for a joint statement after meetings in 2016 and 2017.

In addition, Beijing and Brussels exchanged new offers in negotiations for a bilateral investment treaty that have been going on for four years and which, in the words of Li, have entered a "new phase".

The Chinese ministry said last week that China would immediately complain to the WTO over American unilateralism.

He echoed European Union calls for a reform of the WTO and agreed to form a joint working group on the issue.

Capital Economics said the cumulative impact of the measures now on the table could potentially reduce China's overall economy by 0.5 percentage points, but that the impact could deepen if the battle escalates.

The EU's retaliatory tariffs are effective in two tiers.

Trump's steel and aluminum tariffs broke that taboo.

Another big issue dividing Europe and China is intellectual property.

Tianjie He of Oxford Economics said the economic growth rate could shrink by 0.2 percentage points if the U.S. were to go ahead with the additional US$200 billion in tariffs and China retaliates.

He noted that Trump and Putin's summit in Helsinki would take place on the same day in Helsinki.

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