As Trump calls U.S.-China trade 'stupid,' China will consider all options in a trade war

Oren Dorell | USA TODAY

Show Caption Hide Caption China to 'fight back' against U.S. trade tariffs China warned on Friday it would fight back "at any cost" with fresh trade measures if the United States continues on its path of protectionism, hours after President Donald Trump threatened to slap an additional $100 billion in tariffs on Chinese goods.

China is prepared to fight should a trade war emerge from an escalating exchange of tariff threats that impact billions of dollars in trade, a Chinese government expert said Monday.

"China is ready to fight back with all options on the table," said Ruan Zongze, a former diplomat and senior fellow at the Chinese Institution of International Studies. Ruan spoke at a discussion on the China-U.S. trade relationship sponsored by the Chinese Embassy in Washington.

"It has said it will fight with comprehensive countermeasures: trade, services, investment, finance and many others," Ruan said.

Ruan spoke after President Trump tweeted Monday that U.S.-China trade is "stupid trade."

"When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%," Trump tweeted. "When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!"

Trump on Sunday predicted the U.S. would prevail in negotiations with China over trade issues, resulting in "a great future for both countries."

Gordon Chang, author of Nuclear Showdown: North Korea Takes On the World, said China is bluffing when it says it will negotiate with the U.S. as an equal on trade.

"It’s not an equal basis," Chang said.

China's smaller economy — $12.1 trillion to the U.S.' $19.8 trillion — and its $375 billion trade surplus with the U.S. means it "is the one that has something to lose," he said. "The Chinese can say whatever they want, they can bluff, but they don’t have the economic power to deal with the United States."

The Trump administration started the tariff fight March 8, when it announced steel and aluminum tariffs that exempted some countries, but not China. The administration said the tariffs would protect U.S. jobs from unfair trade practices.

China responded within hours by threatening 15% to 25% tariffs that would affect $3 billion worth of U.S. trade.

"There is no way for China to back off," Ruan said. "It will defend its interests and the multilateral trade regime."

The next salvo came Tuesday when the Trump administration announced 25% tariffs on $50 billion in Chinese technology products, especially targeting the country's aerospace, information and communications, and robotics sectors. It also included medical devices and flat-screen TVs.

On Wednesday, China threatened 25% tariffs on agricultural products, aircraft and automobiles, potentially impacting $50 billion worth of U.S. exports to China.

Trump hit back Thursday, threatening 25% tariffs on another $100 billion on Chinese imports.

The industries and companies affected represent a significant portion of the trade between the world's two largest economies. Last year, the U.S. exported $130.4 billion worth of goods to China and imported $505.6 billion from China, according to the U.S. Census.

Ruan said the U.S. estimate of the trade deficit is exaggerated by about 20%.

China is the number one holder of the U.S. debt, with $1.16 trillion in January, according to the U.S. Treasury.

The tit for tat threats rocked stock markets. The Dow Jones industrial average fell 572 points Friday, and lost 0.7% of its value last week.

The possibility of a trade war also comes as the Trump administration prepares to meet next month with North Korean leader Kim Jong Un about ending his illicit nuclear weapons program. China handles about 85% of North Korea's trade. Trump in July linked the two issues in two tweets.

"I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet... ...they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!," he said.

Ruan said China wants to keep the trade issue separate from the nuclear issue.

"China will be a very important stake holder in the future in addressing North Korea’s nuclear threat," he said. "However China will not link the North Korea issue to the trade issue."

Ruan blamed the U.S. for the current conflict, but said China seeks to reach an accommodation as an equal. Ruan said there is currently no plan for talks.

"We want to be a partner, to work with each other," he said. "However what happens will not be decided by the U.S. side only. China will play an equal part in determining the future of the US-China relationship."