China's proposal to add a new round of tariffs on $60 billion worth of goods it imports from the USA - retaliation for expanding planned tariffs by the Trump administration - is only hitting one commodities sector hard: liquefied natural gas shipments.
US and Chinese officials have held "hardly any conversations" in the past month, but there's "some hint" the Chinese may be warming to the idea of negotiations, Kudlow said.
Then there is what China says and on Thursday, Beijing urged the United States to "calm down" and return to reason after news that Trump may hike the tariffs from 10% to 25%. It has also slapped 25 percent tariffs on $34 billion worth of Chinese imports.
Days later, Washington unveiled a list of another US$200 billion in Chinese goods, from areas as varied as electrical machinery, leather goods and seafood, that would be hit with 10 per cent import duties.
The most recent threat from the Trump administration came this week, when it warned that it could impose steeper tariffs than originally planned on another batch of imports from China.
The commerce ministry issued a statement saying the new duties would be applied if Washington pulled the trigger on President Donald Trump's threat to raise tariffs on $200 billion worth of Chinese goods.
"I think most of our trade team will tell you we're moving close on Mexico".
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Speaking just hours after China unveiled the countermeasures on Friday, Larry Kudlow, Trump's chief economic adviser, said the U.S. president was willing to follow through with his threats, in a stark warning to Beijing. The US wants concessions from China that it is not demanding from NAFTA, Europe and other allies.
Talks with China and Canada, however, have remained very frosty, and Trump has promised to punish both economies if he doesn't get his way.
The deficits between the USA and Trump's main trade adversaries are also growing. That escalation is likely to continue into September, when those tariffs are supposed to go into effect. But there are major obstacles in the way of further negotiations.
China has already retaliated against some of these measures.
But for the Chinese regime, Washington's demands mean that it should cease its efforts to move up the industrial and hi-tech ladder and take a subservient position in relation to the USA, something which it regards as intolerable.
Beijing's earlier round of tariffs appeared created to minimize the effect on the Chinese economy by targeting soybeans, whiskey and other goods available from Brazil, Australia and other suppliers. Mnuchin is more in favour of coming to an agreement that would bring about a reduction in the USA deficit.
Xu Hongcai, an economist with the China Center for International Economic Exchanges, said: "Even though the U.S. industrial system is large and comprehensive in general, its manufacturing and consumer sectors have had much reliance on imports for many years. But actually, as journalists have noted, how can talks take place under this pressure?"
The events give Trump a chance to frame on his own terms his much-debated moves on trade, foreign policy, media-bashing and interactions with Russian President Vladimir Putin.