Kudlow Says Don’t Blame Trump as China Warns of Trade Pullback

(Bloomberg) —
Trump China
Containers at the Yangshan Deep Water Port in Shanghai, China, in March. (Qilai Shen/ Bloomberg)

Blame China and those who are breaking trade rules, not Donald Trump, White House economic adviser Larry Kudlow said as China warned that all commitments so far in talks with the U.S. over trade will be withdrawn if the president carries out his threat to impose tariffs.

Kudlow said rule-breaking is going on “all over the place” and Pres. Trump is simply responding to decades of trade abuse.

“Don’t blame Trump,” Kudlow said on Fox News. “Blame China, blame Europe, blame NAFTA, blame those who don’t want reciprocal trading, tariff rates and protectionism.”

While both the U.S. and China reported some progress in discussions this weekend about how to reduce China’s $375 billion goods-trade surplus with the U.S., Trump’s revival last week of a plan to slap tariffs on $50 billion of Chinese imports has cast the talks into turmoil.

“If the U.S. rolls out trade measures including tariffs, all the agreements reached in the negotiations won’t take effect,” state-run Xinhua News Agency reported Sunday, citing a statement from the Chinese team that met with a U.S. delegation led by Commerce Secretary Wilbur Ross.

The Xinhua report came after Ross met Sunday with Chinese Vice Premier Liu He for talks that Ross called “friendly and frank, and covered some useful topics about specific export items.” At the same time as negotiators focus on technical steps to reduce the U.S. deficit, Trump’s swerve has rattled Beijing as it raises the possibility that any agreement made could be simply torn up by the president.

“China is concerned over the U.S.’s unpredictability, especially after Trump turned an about-face on tariffs,” said Gai Xinzhe, an analyst at Bank of China’s finance institute in Beijing. “Trump needs to give out more goodwill in exchange for really productive negotiations. Bluff, threat and willful moves might work in business bargaining, but they could backfire in talks among nations.”

A commentary by state-run China Radio International said that the government’s stance on canceling any agreements reached in the talks if Pres. Trump’s tariffs go into effect was a “red line.”

The U.S. delegation, which was in Beijing for two days, included energy and agriculture experts, reflecting the U.S. desire to increase exports of natural gas and food.

On the Chinese side, officials including Commerce Minister Zhong Shan, Central Bank Governor Yi Gang, Vice Agricultural Minister Han Jun, and Li Fanrong, vice minister of national energy administration, accompanied Liu in the talks, according to a media pool report.

During his visit, Ross has been looking to build on a vague joint statement released May 19, after negotiations in Washington. China pledged then to take steps to “substantially” reduce the U.S. trade deficit, including by buying more American farm goods and energy, though it didn’t commit to a dollar amount.

In addition to tariffs, Ross is under pressure from U.S. lawmakers to stay tough on Chinese telecom-equipment maker ZTE Corp. China pressed the U.S. to give ZTE a break after the Commerce Department cut off the company from U.S. suppliers to punish it for allegedly lying to American officials in a sanctions case.

Last month, Pres. Trump said he would allow ZTE to stay in business once it pays a $1.3 billion fine, shakes up its management, and provides “high-level security guarantees.” Sen. Marco Rubio, R-Fla., and other lawmakers from both parties have questioned Trump’s leniency toward ZTE, arguing the company represents a security risk.

The stakes are high for the global economy, which is cruising at its fastest pace of growth in seven years. But the International Monetary Fund has warned that a trade war could threaten the recovery, and policymakers are contending with a growing list of geopolitical risks, from a political crisis in Italy to the rocky progress of peace talks with North Korea.

Against that background, China is expressing increasing frustration with the tactics deployed by the White House.

“The U.S. can’t have its cake and eat it too,” an editorial published by the state-run Global Times on Sunday said. The U.S. “needs to choose between tariffs and exporting more to China.”

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