By Associated Press
WASHINGTON — With negotiations on hold and tariffs piling up, the United States and China appear to be bracing for a prolonged standoff over trade.
Beijing is airing Korean War movies (antagonist: America) to arouse patriotic feelings in the Chinese public and offering tax cuts to software and chip companies as U.S. export controls threaten Chinese tech companies.
In Washington, Treasury Secretary Steven Mnuchin is talking to Walmart /zigman2/quotes/207374728/composite WMT +0.76% and other companies about finding ways to ease the pain if President Donald Trump goes ahead with plans to extend import taxes to the $300 billion in Chinese products that haven’t already been hit with tariffs.
And the Trump administration is working on an aid package for American farmers hurt by China’s retaliatory tariffs on soybeans and other U.S. agricultural products — on top of last year’s $11 billion farm bailout.
Mnuchin and U.S. Trade Representative Robert Lighthizer wrapped up an 11th round of talks with the Chinese earlier this month without reaching an agreement to resolve a dispute over Beijing’s aggressive efforts to challenge American technological dominance. The U.S. charges that China is stealing technology, unfairly subsidizing its own companies and forcing U.S. companies to hand over trade secrets if they want access to the Chinese market.
“It’s really hard to identify whether this the beginning of a prolonged conflict or just negotiating tactics,” said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and U.S. Treasury. “I increasingly think that this is going to turn into a long-term trade conflict. We have to entertain the possibility that there is no deal.”
Dollar points to the airing of Korean War movies and comments by President Xi Jinping suggesting that the Chinese people need to steel themselves for another “Long March” — a reference to the legendary and arduous trek Mao Zedong’s Communists made to escape pursuers from China’s ruling Nationalist government in 1934-1935.
The world’s two biggest economies are already locked in the costliest trade combat since the 1930s.
The United States has imposed 25% tariffs on $250 billion in Chinese imports and is planning to target another $300 billion — a move that would cover everything China ships to the United States.
China has targeted $110 billion in U.S. products in retaliation.
China is also looking at other ways to pressure the United States.
Xi made it a point to visit a Chinese factory this week that processes rare earths — minerals used in things like mobile phones and electric cars. The unspoken message: The United States needs China to supply the exotic minerals.
China also turned up the heat on Boeing Co. /zigman2/quotes/208579720/composite BA -1.75% : On Wednesday, two of China’s three major state-owned airlines — Air China Ltd. /zigman2/quotes/203408003/delayed HK:753 -1.86% and China Southern Airlines Ltd. /zigman2/quotes/206691352/composite ZNH -1.58% /zigman2/quotes/208800010/delayed HK:1055 -2.99% — demanded compensation for the grounding of the plane maker’s 737 Max jetliners after fatal crashes in Ethiopia and Indonesia. The third state-owned carrier — China Eastern Airlines Ltd. /zigman2/quotes/205483076/composite CEA -3.89% /zigman2/quotes/203578936/delayed HK:670 -4.19% — made a similar request last month.
Meantime, the Chinese government took steps to protect tech companies from becoming collateral damage in the U.S.-China conflict.
Under the new measure, most software and integrated circuit companies can skip paying income taxes for two years and will see their tax bills cut by half for three years after that, the Finance Ministry said.