Update: Liu He Urges Calm as Trade War Escalates

China is willing to settle the trade war through negotiation and “firmly opposes” U.S. moves to escalate matters, Vice Premier Liu He said on Monday morning, urging calm after ructions intensified over the weekend.

“We think an escalation of the trade war is against the interest of China, the U.S. and the entire world,” Liu, who is China’s top trade negotiator, told a technology conference in Southwest China’s Chongqing municipality.

The comments came after the U.S. pledged to further increase tariffs on Chinese goods. The existing additional tariffs on $250 billion worth of Chinese products will be increased to 30% from 25% starting from Oct. 1, and the planned tariffs on $300 billion worth of Chinese goods, part of which are scheduled to take effect on Sunday, will be increased to 15% from 10%, U.S. President Donald Trump tweeted on Friday after U.S. markets closed.

Trump told reporters that he had “second thoughts” about escalating the trade war with China during a breakfast meeting with U.K. Prime Minister Boris Johnson on the sidelines of the G-7 summit in Biarritz, France, on Sunday. However, White House Press Secretary Stephanie Grisham later clarified in a statement that Trump didn’t regret starting the trade war, but he did have second thoughts on whether he should have raised the tariffs even higher.

Before announcing the tariff hikes, Trump wrote on Twitter that he would order U.S. companies to “immediately start looking for an alternative to China,” including the relocation of manufacturing to the U.S.

He also said U.S. logistics companies should do more to prevent deliveries of the powerful opioid fentanyl from China. Synthetic opioids such as fentanyl contributed to an estimated 32,000 U.S. deaths in 2018, according to figures from the U.S. Centers for Disease Control and Prevention. It has been difficult for the U.S. to control the substance as China is the largest source of fentanyl and fentanyl-like substances in the U.S., according to a report by U.S. government’s U.S.-China Economic and Security Review Commission.

“The escalation in the past couple of days suggests more escalation is likely underway. The chance for (the) U.S. and China to strike any deal is getting increasingly smaller,” economists at investment bank Nomura International (Hong Kong) Ltd. said in a note Monday morning. They expected Beijing to ramp up policy easing to stabilize growth as the economy is likely to slow and markets will become even more volatile in the next few months, they said in the note.

Trump’s move came in response to Beijing’s threat on Friday to impose additional 5% or 10% tariffs on $75 billion worth of American goods, after Trump said in early August he would charge additional 10% tariffs on $300 billion worth of Chinese products, starting from Sept 1. The Trump administration later delayed the tariffs on some Chinese imports, including cell phones, laptop computers and game consoles, until mid-December.

“We welcome investors from countries around the globe, including the U.S., to invest and operate business in China, and will continue to make the effort to foster a good environment for investment and property protection,” Liu told the conference.

Liu pledged China would open up to the world and further develop its technology. “We are firmly against blocking technology and protectionism, and will strive to protect the integrity of industrial chains.”

Zeng Jia contributed to this report.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)