"Trade War Has Not Made America Great Again": China Lashes Out At US Which Is "Solely To Blame"

China's media propaganda campaign against the US in the increasingly dirty trade war between the two superpowers can be roughly divided into five parts. As the Economist's Simon Rabinovitch broke down the various phases, these can be grouped roughly as follows: 1) quiet optimism; 2) reassessment; 3) put the theory to the test; 4) US failure is inevitable.

And, as of this weekend, we now appear to be in the "despondent acceptance" phase (unlike the Kubler-Ross model, acceptance precedes anger and nuclear war), because as Xinhua reported overnight, China is now laying the blame squarely on the US for the breakdown of trade talks between the world’s two biggest economies, but hinted at its willingness to resume stalled negotiations with Washington while rejecting any attempt to force concessions from Beijing.

In a white paper on China’s official position on the trade talks released by the State Council Information Office on Sunday, Beijing made it clear the US government "should bear the sole and entire responsibility" for the current stalemate, and hit back at allegations that Beijing had backtracked from its earlier promises.

The trade war has not “made America great again,” the white paper said, but has done serious harm to the U.S. economy by increasing production costs, causing higher prices hikes, damaging growth and people’s livelihoods, as well as creating barriers to U.S. exports to China.

“It is foreseeable that the latest U.S. tariff hikes on China, far from resolving issues, will only make things worse for all sides,” according to the white paper, which also listed details of what it described as U.S. backtracking.

"The Chinese government rejects the idea that threats of a trade war and continuous tariff hikes can ever help resolve trade and economic issues," according to the white paper. "Guided by a spirit of mutual respect, equality and mutual benefit, the two countries should push forward consultations based on good faith and credibility in a bid to address issues, narrow differences, expand common interests, and jointly safeguard global economic stability and development," it said, according to Bloomberg.

As Vice Commerce Minister Wang Shouwen, who led the working-level team in the negotiations, said China is willing to work with the US to find solutions, but the latter’s strategy of maximum pressure and escalation can’t force concessions from China: "When you give the U.S. an inch, it takes a yard", he said.

Of course, that ignores the fact that it was China that reneged on the terms of the agreement in the first days of May, at least according to Washington. Instead, on the allegation that China significantly changed the text under negotiation after the latest round of talks, the white paper said it was “common practice” to make new proposals and adjustments as the talks progressed, something the US had done consistently.

At a press conference in Beijing on Sunday, Shouwen accused the US of being “irresponsible” in accusing Beijing of backtracking on its promises. “Nothing is agreed until everything is agreed,” he said in English, the only time he strayed from his native tongue.

Meanwhile, the white paper said that Beijing remained “committed to credible consultations based on equality and mutual benefit”, but would “not give ground on matters of principle”.

That said, much of the White Paper was similar to the one published last September, and its content is broken down roughly along the following lines, as per CNBC's China correspondent, Eunice Yoon:

  1. China is the grown-up
  2. China is the victim
  3. China wants talks but only as an equal
  4. China will fight US for as long as it takes

When asked what the US side needed to do for the negotiations to continue, Wang referred to a preliminary agreement made by Chinese President Xi Jinping and his US counterpart Donald Trump in Argentina in December.

“The consensus then was to not raise tariffs, and work towards cancelling them,” he said.

Despite the presidents’ efforts, Beijing’s white paper came just a day after it introduced new tariffs on goods imported from the US.

Sunday’s document also accused the US of insisting on “mandatory requirements concerning China’s sovereign affairs”. Though it did not elaborate, the Post reported earlier that Washington had asked Beijing to “completely open its internet” as part of the trade deal. And at a seminar in Beijing on Friday, a group of former Chinese officials accused the US of using the trade talks to undermine China’s national security on issues like Taiwan and the South China Sea.

The latest propaganda escalation, which will not go by unnoticed by the trade hawks in the Trump administration, comes as Beijing has been increasingly critical of Washington over the breakdown of the trade talks and its treatment of Chinese technology giant Huawei. On Friday it said it planned to publish a list of “unreliable” foreign entities deemed to have damaged the interests of Chinese firms, based on anti-monopoly and national security grounds. A day later, Beijing announced an investigation into US logistics company FedEx for the “wrongful delivery of packages”, after Huawei accused FedEx of re-routing of its packages from China to the US.

Wang tried to play down concerns that a planned list of unreliable entities that China announced last week will be used to target foreign companies as a retaliation tool in the trade war. That might be an "over-interpretation," Wang said, adding that China welcomed foreign firms that operate within the law. "There’s no grounds to blame China" for starting an investigation into FedEx Corp. mis-routing some packages from Huawei Technologies Co.

Meanwhile, when asked about US firms’ complaints that customs clearance was taking longer since the start of the trade war, he advised companies to contact the relevant authorities. “If certain firms are faced with specific issues, they can talk to local commerce departments,” he said.

On the increasingly touchy matter of exports of rare earth minerals, Wang repeated Beijing’s comments of the past week. “With the world’s richest rare earth resources we are willing to satisfy the normal needs of other countries,” he said. “But it’s unacceptable if other countries use rare earths imported from China to suppress China’s development.”

But in what could be the worst news for bulls who are clutching at any straw now to indicate an improvement in diplomatic relations, when asked about the possibility of a summit between Xi and Trump on the sidelines of the Group of 20 summit in Osaka, Japan later this month – as suggested by the American president in May – Wang said he had no information on the matter, according to the SCMP.

Shi Yinhong, an adviser to China’s State Council and a specialist in US affairs at Renmin University in Beijing, said that despite the pressure from the US, Beijing had shown restraint in its efforts to fight back... which it has indeed, suggesting that Trump's read of the calculus - one according to which China has more to lose than gain from taking trade war to the next level - is the correct one.

“In the areas of trade and technology, China has less leverage than the US, but it has kept its retaliatory measures within these areas,” he said. “If it extended its efforts to areas like North Korea and Iran, it could do much greater damage to Trump.”

The punchline: when addressing the chances of the two sides achieving a breakthrough in their trade negotiations by the time of the G20 summit, Shi said: “The difference is too wide and would be impossible for them to bridge in a month.”

The full White Paper can be found here.