Former Senator Max Baucus
Anjali Sundaram | CNBC
Former U.S. Ambassador to China Max Baucus said President Donald Trump’s approach to trade negotiations with China is aggravating tensions, and called for his administration to be patient, rather than imposing additional sanctions.
Baucus, who served as the U.S. Ambassador to China from 2014-2017 under President Barack Obama, made the comments during an appearance on CNBC’s “The Exchange” Monday, after China’s currency exchange rate fell below seven yuan to the dollar for the first time in over a decade. The move ignited fears of a wider trade war between the two nations.
The Dow Jones Industrial Average dropped more than 900 points in afternoon trading on Monday.
Market analysts said China devalued its currency in retaliation for Trump’s 10% tariff on an additional $300 billion in Chinese goods which will go into effect on Sept. 1.
“The key here is for us to get more stability, more predictability, and the way to do that is to be a little more patient,” Baucus said. “This is an accelerating gulf between our two countries. We need adults on both sides of the Pacific to stop this nonsense. Let cooler heads prevail. Swallow a bit of pride.”
Baucus warned that the U.S. is outmatched in terms of its capacity to retaliate against China because “President Xi [Jinping] and China have many many more tools at their disposal than President Trump does.”
Baucus sharply criticized Trump’s decision to impose new tariffs just after the end of US-China talks in Shanghai.
“It’s really a slap in the face for President Trump to enact those tariffs just after the Shanghai talks,” he said. “China thinks ‘Trump’s dealing in bad faith, so we’re going to slap this currency devaluation on him.”
The White House did not immediately return CNBC’s request for comment.
Baucus emphasized that China’s decision to devalue its currency marks a significant turning point for China, which he said is “bringing out the big guns” and could presage further decreases. He encouraged the U.S. to deal with China’s economic policies in other ways.
“It’s showing that trade wars cannot be won,” he said. “This is big and it’s concerning and it’s discouraging.”