PM: Trade war between US, China ‘catastrophic’ for world

It is in China's fundamental interests to contribute more to strengthening multilateralism "at this testing moment", when it seems to be on the brink of a trade war with the United States, said Prime Minister Lee Hsien Loong.

For if trade tensions erupt into a full-scale trade war, it could damage US-China ties and cause catastrophic consequences globally, Mr Lee said yesterday at the Boao Forum for Asia, an annual meeting of top executives and leaders held on China's Hainan Island.

"China and the US have the most important bilateral relationship in the world," said Mr Lee, and a trade war would make it hard for both to cooperate in areas such as climate change, nuclear non-proliferation, regional security and denuclearisation of the Korean peninsula.

"None of these issues can be solved without the full participation of both countries. And if the disputes escalate and destabilise US-China relations, the consequences for the world could be catastrophic," he said.

In recent weeks, the US has threatened to impose tariffs on Chinese imports, in a bid to protect domestic industries and reduce the bilateral trade deficit. China responded by outlining a list of US imports that it intends to impose tariffs on.

US-China trade tensions have riled markets and stoked fears of an impending trade war.

Mr Lee, who is on a five-day working visit to China and attending the forum for the first time, said he was confident that China would handle this challenge well, safeguard its interests and keep the global system open and inclusive.

"In international affairs, one of China's strengths has always been its ability to take a strategic, long-term view. It is in China's fundamental interests to contribute more to strengthening multilateralism, in keeping with its larger weight in the world," Mr Lee said at the opening of the forum.

He added that while there would be competition between major powers, it made "all the difference whether competition takes place within a framework of interdependence and generally accepted rules of the game".

"Because what is ultimately at stake is war and peace, the security and stability of the world," he said.

Mr Lee said Singapore does not think imposing unilateral tariffs is the correct solution. Such measures do not abide by World Trade Organisation (WTO) rules, he said, adding that trade disputes should be resolved within the WTO framework.

Mr Lee left for Shanghai yesterday for the last leg of his visit.