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     BEIJING (MNI) - From the beginning of Donald Trump's presidency, the
possibility of a large-scale trade war between the world's two largest economies
has unsettled global markets. The Trump administration's latest moves, including
anti-dumping charges against Chinese aluminum sheets and denying China's bid for
market economy status, only further fanned these concerns.  
     However, the Chinese government doesn't see the Trump trade moves as
significant enough to risk a trade war, or even elicit any retaliation, such as
restricting U.S. agricultural exports, a potent weapon that would directly harm
pro-Trump Midwestern voters, sources close to the Chinese government told MNI.  
     The Chinese government feels no pressure to act and instead will bide it's
time and wait to see how the Trump administration policy positions evolve,
particularly after next autumn's key Congressional elections. 
     China sees the latest trade shots fired as politically motivated to show
Trump's domestic base that he is fulfilling its "tough on trade" campaign
promises, a source close to the Chinese Ministry of Commerce (MOFCOM) said.
Despite some turmoil on the surface, the political rhetoric, the strong
bilateral Sino-U.S. trade relationship remains intact, the source said. 
     Speculation of a trade spat mounted after the U.S. Department of Commerce
self-initiated dual anti-dumping (AD) and countervailing duty (CVD)
investigations of Chinese aluminum sheet imports, without direct complaints from
the domestic industry. And last Thursday, the Wall Street Journal reported that
U.S. Trade Representative Robert Lighthizer argued in an official submission to
the World Trade Organization in support of the Europe Union's position against
recognizing China as a market economy, which would limit the ability of the EU
and US to bring trade actions against it. 
     The commerce department said Chinese aluminum sheet imports were valued
about $600 million last year. That is only a fraction of the $300 billion
U.S.-China trade deficit deficit last year. 
     China's official reaction was measured. In a short statement, a mid-level
Ministry of Commerce official expressed "strong dissatisfaction over the
protectionist tendency" and that it would act to protect its own industry. There
haven't been follow-up steps this week. 
     A Chinese government scholar told local media that the U.S. opposition to
China's "market economy status" was consistent with its past positions. In a
daily briefing this week, the Chinese Foreign Ministry spokesman gave a tepid
response to the issue and stressed President Xi Jinping's telephone call with
Trump, suggesting the trade spat won't derail its cooperation on North Korea. 
     China's reaction has followed a pattern of restraint this year, in contrast
with the global reaction to Trump's bombastic behavior that has been marked by
disgust, mockery and lament. China rarely gets in war of words with Trump.
Trump's tweets, along with Twitter, are blocked by China's Great Firewall,
therefore receiving little coverage. Local media's coverage of Trump instead
focuses on his wealth, his supposedly "businessman" approach and his flatteries
of China. Chinese public swooned after Trump posted a video during his visit
last month of his granddaughter speaking Chinese.
     The muted reaction is due in part to China not allow criticism of its top
leaders, and by extension, leaders of most foreign powers (with the exception of
leaders of Japan or Taiwan, who are deliberately vilified). China adopted a
disciplined approach to comments on Trump as soon as it became apparent he would
become U.S. president. 
     "When Trump gyrates, we cannot afford to swing," the Chinese government
source told MNI. "When the United States is in the middle of mayhem, China needs
to steady itself even more; when two waves amplify each other, the consequences
will be disastrous," the source said. 
     China knows the current U.S. government is in chaos. The people in the
Trump administration are either self-interested or lack the vision to project an
actionable alternative to the status quo. "Steve Bannon, Lighthizer, these
people are stuck in a bygone era," they do not really represent America's core
interests, the source argued dismissively. 
     The Trump administration has not yet proposed concrete actions to reduce
the bilateral trade imbalance, the MNI source said, echoing views by local
commentators.  
     "Economic ties with the U.S. is existential to our future. [Communist
Party] General Secretary Xi Jiping made this very clear at the 19th Congress,"
Mao Zhenhua, director of joint economic research at Renmin University, told MNI.
"Everything can be put on the table and we are prepared to negotiate. But the
U.S. side hasn't presented actionable requests." 
     Whether it's the Comprehensive Economic Dialogue or negotiations over the
Bilateral Investment Treaty, the momentum for cooperation between the two
nations has stalled, a source at the U.S. embassy in Beijing familiar with the
economic and trade negotiations told MNI. 
     One reason is that the divided U.S. interests often undermine each other
when negotiating with China, allowing China to play one side against the other,
the source said. Trump's undermining of Secretary of State Rex Tillerson's
standing and the many U.S. diplomats jumping ship have also left the U.S. trade
and economic teams rudderless.
     But while China tries to project "non-interference" as the different U.S.
factions squabble, sometimes it can't contain its glee at the disarray. On
Monday, the English-language mouthpiece China Daily cited a commentary run by
the Beijing Youth Daily, not allowing the provocative comments be interpreted as
an official government response. It was authored by Ma Xiaolin, a former
propaganda official at the Xinhua News Agency and now a university professor.
     Ma wrote that widespread speculation over Tillerson's future as U.S.
secretary of state is but one of the many incidents that has revealed Trump's
lack of experience and strategic view of global affairs. Trump has also engaged
in self-inflicted "trouble-making" by making about-face comments after leaving
Beijing last month, Ma argued. Trump trumpeted the multiple business deals won
from China during his Beijing visit and agreed to pursue diplomacy to resolve
the North Korean nuclear crisis. Yet only a month later, Trump provoked another
DPRK missile test by re-labelling North Korea a state sponsor of terrorism, and
risked a "trade war with China" by opposing China's push to gain recognition as
a market economy in the WTO. 
     Noticeably, the China Daily omitted the sensitive "trade war with China"
expression in its translated citation. That shows that as much as China is irked
by the confrontational shots fired by the U.S. side, it wants to play down these
issues, MNI's government source stressed. 
     "Never in recent history have we seen the two biggest ideological rivals so
economically intertwined," the source said. A trade war is unimaginable, and
even Trump understands that. The U.S. president also knows trade deficit with
China doesn't represent debt nor can it be resolved easily, but he is employing
the issue to garner support from his political base, the source argued.
     MNI's U.S. diplomatic source agreed that an outright trade war with China
is very unlikely. The U.S. cannot succeed alone in a large-scale trade
confrontation, because China could undermine the effort by engaging more with
the EU or other trading partners. The Trump-led U.S. administration has, on the
contrary, weakened its traditional alliances, making it easier for China to
divide and conquer.
     If the Republicans retain control of Congress in next year's election, so
Trump knows his presidency is more secure, that's when his administration may
formulate a constructive trade strategy, the government source said. Until then,
Trump will be preoccupied with domestic politics and so there is little China
can do but to focus on managing its own economy well.  
     In many ways, the vacuum created by the withdrawal of U.S. leadership in
the world may be a good thing, the source close to the Chinese government
argued. Countries now are forced to address their own issues without referring
or deferring to the U.S., he said, citing Saudi Arabia's recent steps at reform.
     This is certainly a boon to China, allowing it to pursue its reforms and
build broader trade relations with nations alienated by Trump. Had Trump not
pulled the U.S. out of the Trans-Pacific Partnership, China would have faced its
biggest economic challenge ever, he admitted. The combined size of the 11
non-U.S. members is just about the same as China, meaning the TPP including the
U.S. would have easily limited China, he said.
     Minus the U.S., the TPP-11 is no match for China, he said.
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com
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