As Trade War Persists, Mnuchin Says China Talks Have ‘Broken Down’

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As Trade War Persists, Mnuchin Says China Talks Have ‘Broken Down’

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Republicans and Democrats on the House Financial Services Committee showed little patience for Treasury Secretary Steven Mnuchin’s answers about the lack of progress in resolving the trade war.CreditT.J. Kirkpatrick for The New York Times
  • July 12, 2018

WASHINGTON — The trade war between the United States and China showed no signs of yielding on Thursday, as Steven Mnuchin, the Treasury secretary, told lawmakers there was no clear path to resolution and Beijing blasted the administration over its approach.

Mr. Mnuchin, who has tried to avoid calling the trade tensions with China a “war,” said talks with Beijing had “broken down” and suggested it was now up to China to come to the table with concessions. President Trump, speaking in Brussels on Thursday, described the trade talks with China as a “nasty” battle.

The Chinese, meanwhile, accused the United States of “acting erratically” and said the administration had “blatantly abandoned the consensuses that two sides have reached and insisted on fighting a trade war with China.”

Republicans and Democrats on the House Financial Services Committee showed little patience for Mr. Mnuchin’s answers about the lack of progress, repeatedly pressing him about whether there was a strategy to resolve the trade war and expressing concern that it was starting to hurt parts of the economy.

The White House has already hit Beijing with tariffs on $34 billion worth of imports and China has responded with a similar amount of levies on American goods, including soybeans, pork and cars. On Tuesday, the administration outlined tariffs on another $200 billion worth of Chinese products, including many consumer products like furniture, dog leashes and fish.

“Is there a master plan?” asked Representative Mia Love, Republican of Utah. “I implore you to work to end this thing soon.”

Lawmakers from both parties have been bombarded with complaints about tariffs from soybean farmers, carmakers, nail manufacturers and other businesses about the fate of their industries as they are starting to face higher steel and aluminum costs and feel the pain of retaliation from Europe and China.

On Thursday they pressed Mr. Mnuchin, who is seen as a voice of moderation on trade in the administration, to persuade Mr. Trump to back away from the trade war.

Representative Jeb Hensarling, Republican of Texas and chairman of the committee, told Mr. Mnuchin that he was deeply concerned about the state of global trade and signs that business optimism was starting to wane. He said that he was not impressed with the lone trade deal that Mr. Trump has struck, with South Korea, and warned that the strong run of economic growth was at risk.

“I would just assure you we very much are monitoring the impact on the economy of all these trade issues,” Mr. Mnuchin said in response to questions about the economic effect.

Mr. Mnuchin defended the administration’s approach and insisted that economic growth remained Mr. Trump’s priority, which did nothing to mollify Mr. Hensarling, a close ally of the president.

“I appreciate the words; I am concerned about the deeds,” he said.

Republicans and Democrats on the Senate Foreign Relations Committee also repeatedly — and exasperatedly — pushed another Trump administration official to detail a strategy for prevailing in the trade dispute during a hearing on Thursday morning.

“The administration needs to explain to Congress where this is all headed,” Senator Bob Corker, Republican of Tennessee and the committee’s chairman, told Manisha Singh, an assistant secretary at the State Department, as she prepared to testify.

“To my knowledge, not a single person is able to articulate where this is headed, nor what the plans are, nor what the strategy is,” Mr. Corker said.

The committee’s top Democrat, Senator Robert Menendez of New Jersey, told Ms. Singh at another point that “I don’t understand what the pathway is here, at the end of the day.”

Ms. Singh, who leads the department’s Bureau of Economic and Business Affairs, defended the administration’s moves. “Our endgame is for China to change its behavior,” she said.

After Ms. Singh tried to explain the administration’s approach, Mr. Corker replied, “That enlightened us in no way.”

While Mr. Trump prizes unpredictability, his approach to trade agreements is sowing uncertainty that many business leaders, officials, lawmakers and others worry could undercut an otherwise booming economy.

In an interview with the radio program “Marketplace” on Thursday, the Federal Reserve chairman, Jerome H. Powell, said that “we don’t know” how the trade dispute will play out, but that it could harm the recovery.

“I wouldn’t want to, you know, dive into a bunch of hypotheticals here,” Mr. Powell said, “but I would say, you can imagine situations which would be very challenging, where inflation is going up and the economy is weakening.”

The Trump administration has asked China to make a wide array of changes, including reducing its trade surplus with the United States, stopping what it described as theft of American intellectual property and opening Chinese markets to American business.

But by giving the Chinese a long list of demands, that has encouraged Beijing to focus on those that are easiest to fulfill, said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce.

“The administration, to a degree, has given the Chinese an off ramp,” he said. “Giving the Chinese a choice is not an optimal negotiating approach.”

China has also had difficulty figuring out whom to negotiate with, after tentative agreements reached with Mr. Mnuchin and Wilbur Ross, the commerce secretary, fell through.

“I think they’re coming to the conclusion that it doesn’t matter whether Mnuchin or Ross or anybody is in the front of the line, that it’s really going to be figuring out what Trump wants,” said Claire Reade, senior counsel at Arnold & Porter Kaye Scholer.

In a sign of the impasse that the dialogue between China and the United States has reached, the Chinese Ministry of Commerce issued a statement on Thursday arguing that it has been unfairly vilified with false claims about its trade practices.

“This is a distortion of facts, therefore groundless,” the ministry said. “For the purpose of meeting domestic political needs and suppressing China’s development, the U.S. has fabricated a set of policy arguments that distort the truth about Sino-U.S. economic and trade relations.”

Mr. Mnuchin said on Thursday that Mr. Trump would not do anything to jeopardize economic growth. He insisted that he was going to help work with companies to get exemptions from tariffs and that he would try to persuade businesses such as Harley-Davidson, the motorcycle maker, not to move manufacturing abroad to mitigate the pain of retaliatory tariffs.

While Mr. Mnuchin was successful in staving off draconian new Chinese investment restrictions, the tariffs have kept coming and it remains unclear how much influence he really has with Mr. Trump. Despite his private reservations, Mr. Mnuchin continues to defend the administration’s trade policies.

“I can assure you that the president listens to my advice,” Mr. Mnuchin said in response to a question from Representative Gregory W. Meeks, Democrat of New York. “He is the president. Sometimes he follows my advice, and sometimes he doesn’t, which I respect.”

Unimpressed, Mr. Meeks mocked Mr. Trump for describing himself for the second time on Thursday as a “very stable genius” and asked the Treasury secretary if he saw himself the same way.

“I am stable,” Mr. Mnuchin said with a chuckle.

Ana Swanson contributed reporting.

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