China warns Washington's 'capricious' trade actions will hurt US workers

By Yawen Chen and Se Young Lee

BEIJING (Reuters) - China's commerce ministry on Thursday accused the United States of being "capricious" over bilateral trade issues, and warned that the interests of U.S. workers and farmers ultimately will be hurt by Washington's penchant for brandishing "big sticks".

Previous trade negotiations with the United States had been constructive, but because the U.S. government is being unpredictable and challenging, Beijing has had to respond in a strong manner, commerce ministry spokesman Gao Feng said in a regular briefing in Beijing.

President Donald Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliates against his previous announcement to target $50 billion in imports. The United States has alleged that China is stealing U.S. intellectual property, a charge denied by Beijing.

Washington's accusations of forced tech transfers are a distortion of reality, and China is fully prepared to respond with "quantitative" and "qualitative" tools if the U.S. releases a new list of tariffs, Gao said.

"It is deeply regrettable that the U.S. has been capricious, escalated the tensions, and provoked a trade war," he said. "The U.S. is accustomed to holding 'big sticks' for negotiations, but this approach does not apply to China."

Financial markets are worried of an open trade conflict between the world's two biggest economies after three rounds of high-level talks since early May failed to reach a compromise on U.S. complaints over Chinese practices and a $375 billion trade deficit with China.

A Sino-U.S. trade war could disrupt global supply chains for the tech and auto industries, sectors heavily reliant on outsourced components, and derail world growth.

"It will not be easy for the U.S. to identify $200 billion worth of Chinese imports that it can levy tariffs on without hurting U.S. companies and/or consumers, given the strong involvement of U.S. companies in a large share of China's exports to the U.S.," British forecaster Oxford Economics said in a recent note.

'CANNOT BE SOFT'

China said it will impose additional tariffs on 659 U.S. goods, with duties on 545 of them to kick in on July 6, after Trump said Washington will impose tariffs on $50 billion of Chinese products.

The U.S. goods affected on July 6 include soybeans, fruit, meat products such as pork, autos, as well as marine products.

Beijing has yet to announce an activation date for its tariffs on the remaining 114 U.S. products, which include crude oil, coal and a range of refined fuel products.

"We cannot be soft with Trump. He is using his 'irrationality' as a tactic and he is trying to confuse us," said Chen Fengying, an economics expert at state-backed China Institutes of Contemporary International Relations.

"But if we could accomplish some of the things that he wants us to do - such as IP, market reforms, he'd be helping us. Of course there are risks, those would depend on how we handle those reforms."

China could hit back at U.S. firms listed on the Dow Jones Industrial Average if Trump keeps exacerbating tensions with China over trade, state-controlled Chinese tabloid The Global Times said on Thursday.

The Dow, which counts Boeing Co, Apple Inc and Nike Inc among its constituents, ended down 0.17 percent on Wednesday. The 30-stock share index has declined 0.25 percent year-to-date.

"U.S. unilateral protection measures will ultimately harm the interests of U.S. companies, workers, and farmers," Gao told reporters.

He said the two sides are due to negotiate on issues around the manufacturing and service industries "in the near future".

White House trade adviser Peter Navarro, who views China as a hostile economic and military power, said on Tuesday that Beijing had more to lose from a trade war.

"Jobs for the Chinese are just as precious as those for the Americans," Zha Daojiong, professor of international political economy at the School of International Studies at Peking University, told Reuters in an email.

"It will be wise for the two sides to come back to the negotiation table, abide by a temporary agreement and turn down the rhetoric."

China imported $129.89 billion of U.S. goods last year, while the United States purchased $505.47 billion of Chinese products, according to U.S. data.

(Reporting by Se Young Lee and Yawen Chen; Writing by Ryan Woo; Editing by Richard Borsuk & Shri Navaratnam)