Trump could be on course for trade policy battle with China, warns Citigroup

Signs that new president is heading for antagonistic relations with China

Donald Trump’s administration may be on course for a tense relationship with China amid disputes over trade policy, according to Citigroup, which warns that the new US government could introduce more protectionist measures against manufactured goods from Asia’s top economy.

‘There are growing signs the Trump administration is heading for antagonistic relations with China,’ the bank says in a report that examines how commodities including metals and farm goods may fare in 2017. While the bank holds its view that a trade war could be avoided, it does anticipate ‘increasing trade frictions’ between the two.

President Trump made trade relations a central theme of his election campaign, arguing that the US was getting a bad deal from agreements ranging from Nafta to the Trans-Pacific Partnership (TPP). He repeated his ‘America First’ message in his inauguration speech, and immediately vowed to withdraw from the TPP deal.

‘We are more likely to see the US aggressively targeting China in sectors where the US runs a large deficit with China or with significant [state-owned enterprises],’ Citigroup says.

China has options to react, including bringing cases to the World Trade Organization, using countervailing measures and possibly banning exports of strategically important commodities such as rare earth elements, says Citigroup.

Trump has pledged to use ‘every lawful presidential power to remedy trade disputes’ with China, including tariffs.

There have been mixed signals from China’s media to Trump’s announcements. After the inauguration, the Global Times, a Chinese newspaper run by the Communist Party, said the speech signaled a ‘high possibility’ of trade frictions.

The official Xinhua News Agency congratulated Trump on his inauguration and said it hoped for ‘win-win’ co-operation between the two nations, and an editorial run by state-backed newspaper China Daily took a similar tone.

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