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Chinese state media threatens 'big stick' if Trump seeks trade war

President-Elect Donald Trump talks to members of the media after a meeting with military leadership at the Mar-a-Lago club in Palm Beach, FL on Wednesday, Dec. 21, 2016. Photo: Getty Images

Chinese state media warned US President-elect Donald Trump that he'll be met with "big sticks" if he tries to ignite a trade war or further strain ties.

"There are flowers around the gate of China's Ministry of Commerce, but there are also big sticks hidden inside the door -- they both await Americans," the Communist Party's Global Times newspaper wrote in an editorial on Thursday.

The article was published in response to Trump picking Robert Lighthizer, a former trade official in the Ronald Reagan administration who has criticized Beijing's trade practices, as US trade representative.

The editorial was also published on the same day that China's Foreign Minister Wang Yi told US Secretary of State John Kerry that the two countries should develop ties in the proper direction, amid unease in Beijing over Trump's comments on Taiwan and trade. Wang told Kerry that ties were at an "important stage" and that cooperative achievements were "not easy to come by".

The latest salvo from state-run outlets followed others aimed at Peter Navarro, a University of California at Irvine economics professor and critic of China's trade practices whom Trump named to head a newly formed White House National Trade Council. Those choices plus billionaire Wilbur Ross, the nominee for commerce secretary, will form an "iron curtain" of protectionism in Trump's economic and trade team, according to the paper.

The three share Trump's anti-globalization beliefs and seem unlikely to keep building the current trade order, it said, adding that they will be more interested in disrupting trade. Souring relations could have serious ramifications for the economies: Americans are the biggest buyers of exports from China, the world's largest trading nation.

Official media issued other recent warnings after the announcement about Navarro, saying he doesn't understand trade and will damage relations. An editorial in the state-run China Daily accused Navarro of "anti-China alarmism" and said appointing the "Death by China" author is another sign Trump seems intent on confrontation with China. An opinion column said that he's "deaf and blind to the enormous win-win cooperation and potential of China-US relations."

Chinese policymakers are wary of Trump's protectionist stance on trade, and he has promised a hard line on China, threatening to raise tariffs on its exports to the US.

Xinhua news agency, which usually reflects government thinking, this week chided Trump for his proclivity for criticizing China on Twitter, saying the social media platform "should not become a foreign policy tool".

The Global Times English version said that the US will adopt reckless protectionist policies and that China is powerful enough to withstand pressures from the administration. "China needs to face up to the reality that the Trump team maintains a hard-line attitude," it said last month. "Beijing will get used to the tensions between the two countries. If Washington dares to provoke China over its core interests, Beijing won't fear setting up a showdown."

China has many tools to fight back

Cornell University economist Eswar Prasad said that China is unlikely to take trade diktats from Trump and instead use ample tools from multilateral trade rules to financial resources to fight back.

"We will see some sort of action and the risk is that even small actions—given that the China may push back very hard—could very quickly escalate into a tit-for-tat battle that erupts into a trade war," Prasad said.

As the second largest holder of US Treasurys, China has a lot of leverage against the world's largest economy, but it's unlikely to use that as a tool against the US since there are few other options for its money, said Prasad.

"The far more potent weapon that the Chinese have is to use either overt or covert measures to restrict the access of American companies to the Chinese market, which is still a pretty fast growing market," he said.

"(They can also) disrupt the supply chains that many Americans manufacturers have come to rely on and of which China is a critical component, so that really is one way China can inflict pain on US businesses and on the US economy," he added.

"This could quickly backfire on Mr. Trump and the US economy."

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