China trade war fears escalate as threats ramp up

The escalating trade confrontation between Washington and Beijing threatened to boil over Friday after President Donald Trump lashed out again and China called on the EU to join the battle, sending global stocks into the red.

Trump remained defiant and said the pain of the dispute will pay off in the end, while China said that his administration would only "shoot itself in the foot" if it didn't back down from the "extremely wrong" threats.

Global stock markets were unhappy with the turn of events, with Wall Street following European and Asian markets lower.

The United States on Tuesday published a list of $50 billion in Chinese exports set to be hit by tariffs over what Washington says is widespread theft of intellectual property and technology.

China retaliated by unveiling planned levies on $50 billion worth of major US exports such as soybeans, cars and small aircraft.

And Trump responded late Thursday by doubling down -- instructing trade officials to consider tariffs on an additional $100 billion in imports.

"Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers," Trump said in a defiant statement, calling Beijing's reaction "unfair."

So far, only the tariffs on steel and aluminum have taken effect, but the latest threats from Trump take the dispute to a new level: China cannot retaliate in kind since it only imports $130 billion in US products, meaning it would have to find another way to respond.

Amid widespread concern, and calls for restraint from US businesses and farm states most vulnerable to Chinese retaliation, Trump said Friday the outcome would be worth the short-term risk.

"I'm not saying there's not going to be any pain," he told WABC radio in New York, but "we're going to be much stronger for it."

China calls on EU for support

China's commerce ministry said Friday Beijing was ready for further escalation, with state media saying China would "fight back immediately and without hesitation."

"It is a battle between unilateralism and multilateralism, and between protectionism and free trade as well," ministry spokesman Gao Feng said, warning any threat to multilateralism would severely imperil the global economic recovery.

"This is detrimental to the vital interests of China and even more detrimental to the common interests of the world," he said, according to official news agency Xinhua.

China also urged the European Union to join it in taking a "clear stance" against US protectionism.

"This is a joint responsibility of China and the EU," said Zhang Ming, the head of the Chinese mission to the EU, calling for Brussels and Beijing to "jointly preserve the rules-based multilateral trade order, and keep the global economy on a sound and sustainable track."

"We must act together to make that happen," Zhang said in a statement sent to AFP on Friday.

The EU is caught in its own trade drama with Washington, under threat of crippling US steel and aluminum tariffs which have been suspended but only until May 1.

The Chinese appeal came after it filed a complaint in the World Trade Organization saying the US has violated global trading rules, a claim the White House dismissed.

In his statement, Zhang warned "protectionist moves under the pretext of national security will undermine the credibility of the WTO-centered multilateral trade system, and the rules-based global trade order."

Trump responded by once more dismissing the WTO as "unfair" to the United States.

"China, which is a great economic power, is considered a Developing Nation within the World Trade Organization," he tweeted.

"They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair. We were badly represented. The WTO is unfair to U.S."

A happy end?

Oxford Economics analysts estimate the threatened US tariffs cumulatively represent 30 percent of total US imports from China, and if imposed the loss of GDP over 2018-2019 could reach 0.3 percent in each economy.

The latest actions risk putting the countries "on a slippery slope towards a trade war," they said, noting the Trump's team of advisers following recent personnel changes raises the possibility.

But Trump's newly-installed economic adviser Larry Kudlow tried to downplay those concerns, saying the US is "not running a trade war."

"This is a just a proposed idea which will be vetted by" the US Trade Representative, Kudlow told reporters at the White House. "Nothing has been executed"

"We'll see, hopefully this will have a very happy end," he added, noting China is to blame for the confrontation.

"I am still optimistic by the way that the Chinese recognize that the rest of the world is on our side."