China’s options dwindle on trade

Exports say Beijing has failed to thwart Trump’s tariffs

BEIJING — President Donald Trump imposed tariffs in July on $34 billion in Chinese goods. China matched them dollar for dollar with its own.

Then he hit an additional $16 billion in goods in August. China matched that, too.

Now, Trump has made his biggest move yet, announcing 10 percent tariffs starting in a week on $200 billion a year of Chinese goods. But this time, China cannot match them all — and that crystallizes a growing problem for Beijing.

On Tuesday, Chinese officials responded to the president’s latest move by following through on an earlier threat to impose tariffs on $60 billion in American goods — nearly everything China buys from the United States.

China’s responses have so far failed to thwart Trump’s trade offensive, and with the White House amping up the fight again, Chinese leaders are not sure how to respond, people briefed on economic policymaking discussions say.

Chinese officials “are generally confused,” said Raúl Hinojosa-Ojeda, a trade specialist at the University of California, Los Angeles, who has been traveling around China speaking with officials, businesspeople and workers.

“They don’t know what to do,” he added. “They worry that the tit-for-tat model is playing into Trump’s hands.”

China does not import enough from the United States to target $200 billion in American goods — let alone the additional $267 billion in Chinese goods that Trump has threatened to tax.

But China’s leaders feel they cannot back down. They have presented the trade war as part of a broader effort by the United States to contain China’s rise.

Trump has said as much, and did so again at a news conference on Tuesday. “China has been taking advantage of the United States for a long time, and that’s not happening anymore,” he said.

The Chinese public could see any effort to soothe tensions as capitulation. Some hard-liners want a more aggressive stance.

Lou Jiwei, who retired as finance minister in 2016 but is still the head of the country’s social security fund, suggested Sunday that China could deliberately disrupt American companies’ supply chains by halting the export of crucial components mostly made in China. But Chinese trade experts dismiss that idea as impractical and not the government’s position.

Chinese officials know what they do not want to do. They have rejected one idea that would replace the matching tariffs with a more sophisticated system, said the people briefed on the discussions, who spoke on the condition of anonymity because of the fragility of the deliberations. That response — discussed in detail within the Commerce Ministry and other agencies — would have led to lower tariffs on American goods in dollar terms, which could be seen as a fig leaf to the White House.

That approach would have recognized a potentially expensive new reality for Beijing: The tariffs may be here to stay.

In Beijing, proponents of the new approach, which would scale down China’s tariffs in dollar terms to reflect the lopsided trade imbalance between the two countries, say Chinese leaders could still revisit the idea because it offers them a way to contain the damage and soothe tensions.

China’s leaders “don’t really want to engage in a dollar-for-dollar retaliation,” said Yu Yongding, a prominent economist at the Chinese Academy of Social Sciences. “Their purpose is to stop this trade war.”