BEIJING: The United States asked China in a letter last week to cut the tariff on US autos, buy more US-made semiconductors and give US firms greater access to the Chinese financial sector, the Wall Street Journal reported on Monday, citing unnamed sources.

Alarm over a possible trade war between the world’s two largest economies has chilled financial markets as investors foresee dire consequences should trade barriers go up due to President Donald Trump’s bid to cut the US deficit with China.

Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He, a newly appointed vice premier who oversees China’s economy, the Journal said, quoting sources with knowledge of the matter.

The newspaper reported that Mnuchin was considering a visit to Beijing to pursue negotiations.

Fears of a trade war mounted earlier this month after Trump first slapped tariffs on steel and aluminium imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to $60 billion of Chinese goods.

On Friday, China fired a warning shot in response to the US tariffs on steel and aluminium by declaring plans to levy additional duties on up to $3 billion of US imports.

The list of targeted goods made no mention of soybeans or aircraft, China’s two biggest US import items.

China’s third-biggest US import category - motor vehicles - totalled $10.6 billion in 2017, about 8 per cent of the country’s overall US imports by value, according to data from the US Census Bureau. China currently has a 25pc tariff on US cars.

China purchased $2.6bn of semiconductors from the US last year, or 1pc of China’s total semiconductor imports, Chinese customs data shows.

Beijing could also inflict pain on US multinationals that rely on China for a substantial - and growing - portion of their total revenues, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments.

“This could put US companies such as Apple, Microsoft, Starbucks, GM, Nike, etc. in the firing line,” Wolf said.

China can increase the regulatory burden on US companies through new inspections and rules; ban travel; stop providing export licenses of key intermediate goods; raise the tax burden on US multinationals in China; or block US companies from the government procurement market, he said.

FLOUTED RULES: Trump unveiled the planned tariffs targetting Chinese goods after a US inquiry found China guilty of intellectual property theft and unfair trade practices, by forcing US investors to turn over key technologies to Chinese firms.

On Saturday, Liu told Mnuchin in a telephone call the US inquiry violated international trade rules and Beijing would defend its interests, the official Xinhua news agency reported.

A US Treasury spokesman confirmed the call, but declined to comment on the content of any letter or on a possible visit by Mnuchin to Beijing.

“Secretary Mnuchin called Liu He to congratulate him on the official announcement of his new role,” the spokesman told Reuters. “They also discussed the trade deficit between our two countries and committed to continuing the dialogue to find a mutually agreeable way to reduce it.” Chinese foreign ministry spokeswoman Hua Chunying was asked at a daily press briefing about Mnuchin considering a visit and whether China was willing to invite him.

“We have always said China is willing to negotiate to appropriately manage and control differences with the United States on the basis of mutual respect and mutual benefit,” Hua said.

“Our door to dialogue and consultations has always been open.”

Published in Dawn, March 27th, 2018