Behind The Smiles: China “Prepares For The Worst”, Will Counter All US Trade Penalties

Monday, March 20, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Mar 20, 2017

On the one hand, recent tensions between China and the US appeared to have been defused following this weekend’s visit by US Secretary of State Rex Tillerson to Beijing, where it was “all smiles” during his meeting with China’s president. With warm words from Xi, Tillerson on Sunday ended his first trip to Asia since taking office, with an agreement to work together with China on North Korea and putting aside trickier issues. Furthermore, as Reuters adds, preparatory work for a meeting between Chinese President Xi Jinping and U.S. President Donald Trump has begun, China’s Foreign Ministry said on Monday, after a weekend visit to Beijing by U.S. Secretary of State Rex Tillerson. The planned summit between Xi and Trump could happen as soon as next month in the United States.

On the other hand, however, China’s government is already preparing for retaliation for what it deems an inevitable first trade war step by the US, and has been seeking advice from its think-tanks and policy advisers on how to counter potential trade penalties from U.S. President Donald Trump, “getting ready for the worst,” even as they hope for business-like negotiations Reuters adds. The policy advisers believe the Trump administration is most likely to impose higher tariffs on targeted sectors where China has a big surplus with the United States, such as steel and furniture, or on state-owned firms.

China could respond with actions such as finding alternative suppliers of agriculture products or machinery and manufactured goods, while cutting its exports of consumer staples such as mobile phones or laptops, they said. Other options include imposing tax or other restrictions on big U.S. firms operating in China, or limiting their access to China’s fast-growing services sector, they added.

Beijing was a particular target of Trump’s rhetoric during last year’s election campaign, and officials see some friction as inevitable due to China’s large trade surplus, according to several sources involved in the internal discussions. China’s State Council Information Office, the government public relations arm, and the Ministry of Commerce did not return requests for comment.

“There is still room for both sides to resolve problems through co-operation and consultation, rather than just resorting to retaliation,” said a policy adviser who spoke on condition of anonymity. “But we should have plans in case things go wrong.”

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