China has a deep unease over U.S. trade friction.
BEIJING — China says it’s girded for a trade war with the U.S. and can give as good as it gets, but behind the official bravado lies a deep unease over trade friction with Washington.
“There are those who believe the U.S. must lose and China must win,” Li Xiao, a leading economics professor, said in a commencement speech last weekend at northern China’s Jilin University.
“I think this is wishful thinking that defies common sense,” Li said in remarks that circulated widely online this week, praised as a reality check as the world’s two largest economies stood ready to exchange tit-fortat tariffs on tens of billions of dollars of each other’s goods starting Friday.
China has said it will fire back with corresponding tariffs if the U.S. follows through on its threat to impose 25 percent duties on $34 billion in Chinese products. All told, President Donald Trump has said he is prepared to levy higher taxes on up to $450 billion in Chinese imports, or nearly 90 percent of the goods China shipped to the United States last year.
Taking a defiant stance, the Chinese Commerce Ministry on Thursday rejected “threats and blackmail.”
“China will not bow in the face of threats and blackmail, nor will it be shaken in its resolve to defend global free trade,” said ministry spokesman Gao Feng at a news conference.
“China will never fire the first shot,” Gao said. “However, if the United States adopts taxation measures, China will be forced to fight back to defend the core interests of the nation and the interests of the people.”
The trade dispute has roiled the stock market, where the benchmark Shanghai Composite index has tumbled 12 percent in the past two weeks. Longerterm trends are a factor, but uncertainty over trade is taking a toll, analysts say.
Some top Chinese experts say Beijing may have miscalculated the pain the U.S. tariffs could inflict on export manufacturers’ already razor-thin margins and overplayed its hand.
“I strongly urge the Chinese government to fully estimate the negative impact of the trade war on the Chinese economy and adopt practical and pragmatic measures to avoid or mitigate a trade war,” Yu Zhi, a professor at Shanghai University of Finance and Economics, said in an interview.
The first stage of tariffs that target mostly Chinese technology exports may be manageable, Yu said, but if Trump imposes the full scope of tariffs he has threatened to use exporters will see their profits dwindle. That could lead to politically unpalatable job losses.
Any dramatic decline in exports would pose a challenge for President Xi Jinping given that the ruling Communist Party’s claim to power is largely based on its ability to deliver improved living standards and uphold national prestige.