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China would still have room to 'maneuver around' increased US tariffs, expert says

Key Points
  • U.S. President Donald Trump threatened to raise tariffs on Chinese goods later this week.
  • Still, Chinese Vice Premier Liu He is set to join a delegation of Chinese trade negotiators this week in Washington.
  • "China needs an agreement with the United States, and I think the United States also needs an agreement with China. Uncertainty, unpredictability and the prospect of greater turmoil will be a killer for both countries," warns Victor Gao from the Center for China and Globalization.
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'Bluffing' will backfire in US-China trade talks, says expert

U.S.-China trade talks hit a snag when President Donald Trump on Sunday threatened to raise tariffs on Chinese goods — just as an agreement had been said to be "possible" by this Friday.

While Chinese Vice Premier Liu He is still set to join a delegation of Chinese negotiators this week in Washington, the latest development between the world's largest economies has rekindled concerns about the global growth outlook.

However, according to the vice president of a Beijing-based think tank, there is still room for China to "maneuver around the headwinds created by the U.S. trade war" — including if the Trump institutes his threatened tariff increase.

"The trade war really has a negative impact on the Chinese economy — there is no denying of that," Victor Gao of the Center for China and Globalization told CNBC's "Squawk Box" on Tuesday.

"However, how much that impact is and whether China as a whole can come up with ways to overcome the impact, that's another thing," he added. "China is still enjoying 6% to 6.5% GDP growth, which is more than double the GDP growth of the United States."

China's President Xi Jinping and U.S. President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017.
Nicolas Asfouri | AFP | Getty Images

Still, Gao said, it will be in Beijing's — and Washington's — favor to strike a deal sooner rather than later.

"The tariff war is not in China's interest but it's also not in U.S.'s interest. So the sooner the two governments put the trade war behind us, the better," he told CNBC.

The think tanker said both governments should "really calm down," and he warned that bluffing was unlikely to reap dividends in the ongoing negotiations. 

"China needs an agreement with the United States, and I think the United States also needs an agreement with China. Uncertainty, unpredictability and the prospect of greater turmoil will be a killer for both countries."