Pentagon chief downplays US-China spat, hopes for deal

Bloomberg

Acting Defense Secretary Patrick Shanahan said the US and China would eventually resolve their differences, downplaying the significance of escalating trade tensions even as he ripped Beijing’s leaders for behavior that “sows distrust” in Asia.
In a speech in Singapore that came hours after he met a top Chinese defense official, Shanahan indirectly blasted Beijing for employing a “toolkit of coercion” to “exploit others economically and diplomatically, and coerce them militarily.”
He said the US is strengthening alliances in Asia and “investing significantly” in advanced technology that will be deployed in the region.
Still, he objected when one participant asked him about a “face-off” between the US and China, adding that the world’s biggest economies would reach a deal over time.
“Is there a face-off?” he said on Saturday in Singapore at the Shangri-La Dialogue. “I haven’t seen a trade war. There are trade negotiations that are ongoing. We’re building relations with the Chinese military.”
“Negotiations are always difficult,” he said. “You have two large countries that will eventually resolve these issues.”
The trade conflict between the US and China took a dramatic turn for the worse in May when President Donald Trump hiked tariffs after accusing Beijing of reneging on commitments in negotiations. The spat is spurring fears that the two nations are lurching towards an intractable rivalry, one that has already caused jitters in markets around the world.
While the US has threatened Beijing with more tariffs and pressured allies to ban Shenzhen-based Huawei Technologies Co from emerging 5G networks, China has pushed back aggressively. A commerce ministry spokesman said China will establish a list of “unreliable” entities said to damage the interests of domestic companies, a sweeping order that could potentially affect thousands of foreign firms.
The two sides have several opportunities in the next few weeks to get discussions back on track. Treasury Secretary Steven Mnuchin may meet with Chinese officials next week in Japan, and Trump earlier said he would meet President Xi Jinping at the Group of 20 summit at the end of the month in Osaka.
After months of disruptive tit-for-tat tariffs, Washington and Beijing are competing to sway skeptical allies in the region wary of finding themselves squeezed in an escalating global trade war that may ultimately force them to choose sides. On Saturday, Shanahan said no country should have to choose between the US and China while calling on China to end “behaviour that erodes other nations’ sovereignty and sows distrust.”
“Huawei is too close to the government,” Shanahan said, responding to a question on areas of mistrust between the US and China.
“The integration of civilian businesses with the military is too close.”
The Shangri-La Dialogue was part of a broader regional tour for Shanahan that began Wednesday in Jakarta. During the event, Shanahan held meetings with his defense counterparts from Southeast Asia and Singapore PM Lee Hsien Loong, who called on both nations to avoid a “zero-sum dynamic” during a speech at the forum.