President Donald Trump’s administration said on Sunday it was willing to reach an agreement with China to ease the new trade tensions, but also warned that Beijing’s recent announcement of export controls was a major obstacle to the negotiations.
Vice President JD Vance called on Beijing to “choose the rational path” in the latest round of trade war between the world’s two largest economies and claimed that if the war continued, Trump would have more leverage.
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The remarks of Trump and Vance indicate that the United States hopes to continue pressuring China to change its recent trade measures, while attempting to assure the panicked market that a tit-for-tat escalation is not inevitable.
In a report, Goldman Sachs economists Jan Hatzius and Andrew Tilton wrote: “Recent policy moves suggest that the possible outcomes are broader than those that emerged before the last few major China-US meetings.”
The most likely scenario seems to be that both sides abandon their most radical policies, and negotiations lead to a further extension of the suspension of the tariff escalation agreed upon in May – perhaps even an indefinite extension.
On Friday, the stock market, oil prices and cryptocurrencies were all hit. Trump threatened on social media that the US would respond to China’s rare earth export restrictions and other trade measures. US futures rose in early Asian trading on Monday after Trump made the remarks on Sunday.
Vance regarded all this as an ongoing negotiation.
“It will be a delicate contest, and to a large extent it will depend on how China responds,” Vance said on Fox News’ “Sunday Morning Futures.” “If they respond in a highly aggressive way, I can assure you that the president of the United States has many more cards than the People’s Republic of China. But if they are willing to be a little more rational,” he said, “then so will we.”
China’s Ministry of Commerce said earlier on Sunday that the United States should stop threatening to raise tariffs and urged further negotiations to resolve outstanding trade issues.
“Threatening with high tariffs at every turn is not the right way to deal with China,” the Ministry of Commerce of China said. “If the US insists on going its own way, China will resolutely take corresponding measures to safeguard its own legitimate rights and interests.”
Over the past week, China has announced new export controls and other measures, heightening tensions – although some of these measures will not take effect until November or may not be widely implemented.
Goldman Sachs economists said that China’s recent moves might suggest that the US is pushing for greater concessions, which could lead to a “market-friendly outcome”, namely the US lowering some tariffs. However, there is also a risk of a negative outcome, that is, the US and China imposing triple-digit tariffs on each other again.
