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U.S. Trade Official Rebukes Mnuchin on China Trade Truce

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May 30, 2018

Oakland, California. Photo: Sheila Fitzgerald / Shutterstock

By Jenny Leonard and Rich Miller (Bloomberg) — White House trade adviser Peter Navarro criticized Treasury Secretary Steven Mnuchin for declaring the U.S.-China trade war was on hold, calling the remarks an “unfortunate sound bite” and acknowledging there’s a dispute that needs to be resolved.

“What we’re having with China is a trade dispute, plain and simple,” Navarro said in an interview broadcast Wednesday with National Public Radio. “We lost the trade war long ago” with deals such as Nafta and China’s entry into the World Trade Organization, he said.

The remarks from Navarro, a hard-liner on President Donald Trump’s trade team, come just days before U.S. Commerce Secretary Wilbur Ross is scheduled to meet with his counterparts in Beijing to discuss ways to reduce the U.S. trade deficit with China. The White House on Tuesday said the U.S. is moving ahead with plans to impose tariffs on $50 billion of Chinese imports and curb investment in sensitive technology.

Just over a week ago, Mnuchin said in a televised interview that the prospect of a trade war with China was “on hold.” The White House downplayed the Treasury secretary’s comments on Wednesday when asked about Navarro’s remarks.

Mnuchin “didn’t say it was on hold indefinitely,” White House Press Secretary Sarah Huckabee Sanders said in the daily press briefing in Washington. “The president ultimately makes the decisions on trade, and when he does we announce them. And that’s exactly what’s taking place in this process.”

The renewed threat of tariffs could stop the planned talks between Ross and his Chinese counterparts, the Wall Street Journal reported Wednesday, citing sources in both countries. A team of U.S. officials was in the Chinese capital on Wednesday to prepare for the talks.

Asked about potential Chinese retaliation, especially on American farm goods, Navarro said “we’re ready for anything.”

Persistent rifts over trade policy in the White House have created confusion about the U.S.’s future relations with partners from China to the European Union. Mnuchin and White House economic adviser Larry Kudlow are free-trade supporters regarded as more conciliatory toward Beijing than U.S. Trade Representative Robert Lighthizer and Navarro, the administration’s fiercest China hawk.

Trade Battles

The U.S. is confronting China as it picks battles on other trade fronts with some of its closest allies. Temporary reprieve from steel and aluminum tariffs for the EU, Canada and Mexico expire on June 1. The U.S. allies have demanded a permanent and unconditional waiver from the levies, which are being imposed on the grounds of national security.

The U.S. is also racing to agree on a revised North American Free Trade Agreement to give the current Republican-controlled Congress a chance to approve the deal this year. Canadian Prime Minister Justin Trudeau said in an interview on Tuesday that a “win-win-win” agreement is still possible but that he’d rather reach no deal than accept a bad one.

Tariff Surprise

The White House’s unexpected announcement that it would proceed with Chinese tariffs revived worries about a trade war that would upend supply changes and hurt business.

“Conflicting messages coming from the administration is causing whiplash for American companies,” the Virginia-based Retail Industry Leaders Association, whose members include Walmart Inc., Target Corp. and Best Buy Co., said on Tuesday.

The next round of negotiations could provide more clarity. Ross is due to hold talks in Beijing from June 2-4 to work out the details for China to buy more American agriculture and energy exports and narrow the U.S.’s $375 billion trade gap with China.

The advance team for the visit includes senior officials from the departments of agriculture, energy, commerce and treasury, including the U.S. Trade Representative’s Chief Agricultural Negotiator Gregg Doud, according to an emailed statement.

Ross on Wednesday defended Trump’s unilateral tariff measures as necessary to fix a broken global trade system.

“Every country’s primary obligation is to protect its own citizens and their livelihood,” he said. “Maybe that’s a populist saying, but it’s one we feel very strongly about.”

© 2018 Bloomberg L.P

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