China says trade war with U.S. would be "disaster"

New Silk Road

BEIJING— China said Sunday that it would not initiate a trade war with the United States, but vowed to defend its national interests in the face of growing American protectionism.

"There are no winners in a trade war, and it would bring disaster to our two countries as well as the rest of the world," Minister of Commerce Zhong Shan said at a briefing on the sidelines of China's annual parliamentary session.

"China does not wish to fight a trade war, nor will China initiate a trade war, but we can handle any challenge and will resolutely defend the interests of our country and our people," he said.

It was Beijing's latest statement on "problems in Sino-U.S. economic trade and cooperation," alluding to President Donald Trump's plan to impose heavy tariffs on imported steel and aluminum. Trump said Thursday that he was slapping tariffs of 25 percent on imported steel and 10 percent on aluminum, temporarily exempting big steel producers Canada and Mexico.

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Chinese leaders have threatened in the past to retaliate against raised trade barriers, but have yet to take direct action following Trump's announcement.

Citing Chinese researchers, Zhong said the U.S. has been overstating its trade deficit with China by about 20 percent every year. He gave no details on how this figure was reached, but the U.S. and Chinese governments generally report widely differing trade figures because Beijing counts only the first port to which goods go instead of their final destination.

The U.S. reported a $375 billion deficit with China last year, so a 20 percent reduction would still be among the largest trade gaps that it has with any country.

Zhong blamed the trade imbalance in part on controls over U.S. high-tech exports to China, repeating a Chinese claim that Washington could narrow its trade deficit if it allowed Beijing to buy more "dual use" technology such as supercomputers and advanced materials with military applications.

U.S. officials have said such sales would make up only a few percent of the deficit while possibly threatening American national security.

The Trump administration earlier approved higher tariffs on Chinese-made washing machines, solar modules, steel and some other goods, prompting Beijing to accuse Washington of disrupting global trade regulation by taking action under U.S. law instead of through the World Trade Organization.

China's steel mills, a target of U.S. President Donald Trump's ire, are their industry's 800-pound gorilla: They supply half of world output, so every move they make has a global impact.

The steel industry swelled over the past decade to support a history-making Chinese construction boom. Once that tailed off, the country was left with a glut of half-idle, money-losing mills. Beijing has closed mills and eliminated 1 million jobs but is moving too slowly to defuse American and European anger at a flood of low-cost exports that is double the volume of second-place Japan.

In the U.S. market, sales of Chinese steel have plunged due to earlier tariffs of up to 522 percent imposed on some products to offset what Washington says are improper subsidies to producers.

That means that while Trump has singled out China for criticism, his latest tariff hike is likely to hit U.S. allies Japan and South Korea harder. The United States bought just 1.1 percent of China's steel exports last year compared with 12 percent for South Korea and 5 percent for Japan, according to the U.S. International Trade Commission.

Liu He, Chinese President Xi Jinping's top economic adviser, visited Washington earlier this month in an attempt to smooth strained ties.

Zhong said that Beijing would continue to "relax market access" to China, and that it would also attach greater importance to intellectual property rights, another point of tension with the U.S.