U.S. Treasury Secretary Steven Mnuchin rejected warnings that the U.S.-China trade war could create a “digital Berlin Wall” on Wednesday, speaking at a CNBC panel during the World Economic in Davos, Switzerland.
Asked about the risk — first flagged last year by International Monetary Fund Managing Director Kristalina Georgieva, also speaking on the panel — Mnuchin replied, “No, I discard that. To me, it’s about free, fair and balanced trade.” He added that “it’s not a Berlin Wall at all — it’s we want other people to take down the Berlin walls.”
The comments come after 22 months of tit-for-tat trade tariffs between the U.S. and China, initially instigated by the Trump administration in the spring of 2018 on the basis of what it called China’s “unfair” trading practices. Washington and Beijing have yet to come to terms over high stakes digital issues like Chinese telecoms giant Huawei, 5G internet provision, intellectual property theft and the future of the internet more broadly.
“The U.S. is one of the largest trading markets in the world. If we can get free and fair and balanced trade with China, and with our other partners, this is good for us, good for them — one of the single biggest opportunities for American workers, for American companies,” Mnuchin told CNBC’s Geoff Cutmore, citing China’s booming middle class of 400 million people.
“What we’re trying to do is break down barriers to trade, which do exist,” he continued. “And I think most people know the U.S. is the most open market for trade, the most open market for investment — we want to have those same opportunities around the world.”
Mnuchin added that he looked forward to forging a new trade deal with the U.K. after the completion of Brexit.
‘No deadlines’ for phase two China deal
The comment comes just a day after Mnuchin told press that the long-anticipated trade deal may not remove all of the American tariffs imposed on China. The U.S. and China officially signed the first phase of the trade deal last week in Washington, D.C. after nearly two years of disagreements and negotiations.
“As it relates to phase two, I would say there’s no deadlines,” Mnuchin said. “So the first issue we’re very focused on the next 30 days is implementing phase one.”
The secretary added that the deal can be concluded before or after the U.S. election in November, suggesting there was no rush to get it done before the vote.
“There’s also, as part of this, a real implementation office as part of enforcement, and we’ll start on phase two,” the secretary added. “If we get that done before the election, great — if it takes longer, that’s fine.”
Many investors worry the tariffs will linger for potentially years, keeping business uncertainty high and dragging on growth.
Economists estimate that the trade tariffs cost the U.S. gross domestic product (GDP) between 0.3% and 0.7% in 2019, which hit China more heavily, taking a toll of a 1.6% reduction to its GDP for the same year, bringing the world’s second-largest economy to its lowest rate of growth in 30 years.