International businesses expressed hopes that a trade war between the US and China could be averted, urging the two countries to find a compromise before they go ahead with plans to impose steep tariffs in the months to come.
The delay before the proposed tariffs are implemented gives the two sides time to find a compromise to avoid a dispute that would mean lost sales, investment and jobs, US businesses said.
Cui Tiankai, China’s ambassador to Washington, held talks with John Sullivan, acting US secretary of state, on Wednesday about the simmering trade tension, in a sign that both governments still hope to prevent a full-blown trade war.
Larry Kudlow, President Donald Trump’s recently appointed chief economic adviser, attempted to calm fears of a trade war, telling Fox Business: “These are just the first proposals [for tariffs] . . . I doubt if there’ll be any concrete actions for several months.”
His comments helped stabilise the stock market. Having fallen sharply early on Wednesday morning, US shares rebounded in the afternoon as investor optimism grew that Washington and Beijing could pull back from the brink. The S&P 500 index closed up more than 1 per cent on the day.
However a senior US trade official later refused to confirm that any negotiations were under way with China, choosing instead to accuse Beijing of trying to intimidate the Trump administration with its vow to retaliate.
“It’s just simply an effort to intimidate us or to get us to back down,” the official told reporters. “That’s their decision if they want to do that . . . We believe that the best option would be for them simply to change their behaviour [and to stop stealing US intellectual property].”
US exports of goods and services to China account for only about 1 per cent of the nation’s gross domestic product, but businesses worry that worsening trade relations could hit overall economic activity.
The Trump administration has set out a timetable for its tariffs with a May 22 deadline for final comments, setting the stage for a flurry of lobbying as companies and industry groups try to modify the administration’s plans and prevent an escalation in hostilities.
The US manufacturing and agriculture industries face the greatest dangers as they would be squeezed on two fronts: the costs of their raw materials and equipment are being driven up by tariffs on US imports, while their sales to China are threatened by its retaliatory tariffs on their exports. The largest US exports to China last year were aircraft, soyabeans and cars, all of which face possible tariffs.
Among the US shares that did end the day lower was Deere, the agricultural equipment group, which has manufacturing operations in China.
“We strongly encourage officials to work toward a timely resolution to limit uncertainty for farmers and avoid any meaningful disruption to agricultural trade,” Deere said in a statement.
Other companies hit by the sell-off were Boeing, although the proposed tariffs are likely to have little impact on the aircraft maker, and industrials company LyondellBasell, which could be hit by tariffs on chemicals and plastics.
Ford Motor gave a typical response to the threatened tariffs, saying: “We encourage both governments to work together to resolve issues between these two important economies.”
John Heisdorffer, president of the American Soybean Association, warned that the Chinese tariff would “have a devastating effect on every soyabean farmer in America”. He urged Mr Trump to “engage the Chinese in a constructive manner, not a punitive one”.
Jay Timmons, president of the National Association of Manufacturers, said the industry agreed that China’s theft of intellectual property and unfair trade practices threatened US competitiveness, but added that tariffs would “create new challenges” in the form of higher costs and retaliation.
He has written to Mr Trump urging him to pursue a bilateral trade agreement with China “that wholly restructures our economic relationship”.
The list of 1,330 product categories targeted for additional tariffs by the Trump administration avoided many of the principal US imports from China, including phones, clothing and shoes, in part because of an attempt to mitigate the direct impact on consumers. Instead, many of the products targeted are used by businesses, including robots, machine tools and agricultural equipment.
US manufacturers have already been hit by a jump in the price for steel and aluminium from a round of tariffs imposed by the administration last month.
Dennis Slater of the Association of Equipment Manufacturers in the US said the group was “very concerned about the continued deterioration of the US-China trade relationship”, adding that the 1.3m jobs supported by the equipment industry depended on access to global markets, including China.
While he supported efforts to create a fairer trading relationship with China, “imposing taxes on equipment used by construction workers and farmers across the country is not the way to achieve those ends”, he said.
The US chemicals industry has been singled out for retaliatory tariffs. China is an important market for US chemicals and plastics producers, accounting for 11 per cent of their worldwide sales of plastic resins last year. Expected growth in Chinese demand is an important factor behind the $185bn wave of investment under way in the industry.
Cal Dooley, president of the American Chemistry Council, urged the US and Chinese governments to “come to a satisfactory and mutually beneficial decision before this situation escalates further”.
Other US industries, including fruit and nuts, ethanol and wine, were already facing threats from the previous round of Chinese tariffs, announced as retaliation for the US measures on steel and aluminium. The Wine Institute, an industry group, said the total tariffs and tax on a bottle of US wine imported into China would be 67.7 per cent, while wines from Chile, Georgia and New Zealand were tariff-free and paid just 27 per cent tax. Bobby Koch, president of the institute, called for “a swift resolution to this crisis before long-term damage is done to the US wine industry”.
Mr Trump has repeatedly suggested that the threatened tariffs on Chinese imports would be a negotiating tactic, and his recent record shows that he has been prepared to weaken trade measures from the versions that are initially announced.
The steel and aluminium tariffs announced last month were initially said to allow no exceptions, but by the time the regulations were implemented there were exclusions for most of the largest exporters to the US.
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