April 30, 2020 / 6:48 PM / a month ago

UPDATE 3-U.S. mulling potential retaliatory action against China over pandemic - sources

(Updates with U.S. official confirming the discussions)

By Matt Spetalnick and Humeyra Pamuk

WASHINGTON, April 30 (Reuters) - There is a growing push within the Trump administration to craft a list of retaliatory measures against China over its role in the coronavirus outbreak, three sources, including a U.S. official, familiar with the matter said, but cautioned the efforts were in early stages.

President Donald Trump has shown increasing frustration with China in recent weeks over the pandemic, which has cost tens of thousands of lives in the United States alone, sparked an economic contraction and threatened Trump’s chances of re-election in November.

A U.S. official, speaking on condition of anonymity, confirmed that a range of options were under discussion but that it had not yet reached the level of Trump’s top national security team or been taken to the president.

A range of options are being discussed, informally for now by officials across an array of government agencies, including the State Department, White House National Security Council, Treasury Department and Pentagon, two of the sources said.

“There is a discussion as to how hard to hit China and how to calibrate it properly,” one of the sources said as Washington walks a tight rope in its ties with Beijing while it imports personal protection equipment (PPE) from there and is also wary of hurting a sensitive trade deal.

The Washington Post, citing two people with knowledge of internal discussions, reported on Thursday that some administration officials had discussed the idea of canceling some debt held by China as a way to strike at Beijing for perceived shortfalls in its candidness on the COVID-19 pandemic.

Trump’s top economic adviser denied the report. “The full faith and credit of U.S. debt obligations is sacrosanct. Period. Full stop,” White House economic adviser Larry Kudlow told Reuters. “Similarly is the reserve currency status of the U.S. dollar,” Kudlow said. “The story’s completely wrong.”

Trump told Reuters in an interview on Wednesday that he was looking at different options in terms of consequences for Beijing over the virus. “I can do a lot,” he said.

Among the ideas under consideration are sanctions, a new round of tariffs or other trade restrictions, and a possible effort to lift China’s sovereign immunity, two sources said.

The strongest pressure for action is coming from the National Security Council, including deputy national security adviser Matthew Pottinger, while Treasury officials are advising caution, the sources said.

Conversations are at a very preliminary stage and significant action is not considered imminent, the sources said. When asked, U.S. Secretary of State Mike Pompeo has repeatedly said Washington’s priority at the moment was to fight the virus but warned the time to hold Chinese accountable would come.

“Timing matters,” one of the sources said, and added that there was still much debate to be had on any tangible measures. (Reporting by Humeyra Pamuk, Matt Spetalnick, Jeff Mason and Tim Ahmann Editing by Chizu Nomiyama and Jonathan Oatis)

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