The Atlanta Journal-Constitution
China wrestles with cost of hitting back
Slumping economy a factor in strategies to fight tariff war with U.S.
BEIJING — As China considers ways to retaliate against President Donald Trump’s mounting tariffs, it has increasingly acknowledged it must first address its main obstacle to punching back: its slumping economy.
What’s happening
Chinese officials have vowed to respond with measures of their own if Trump follows through on his threat to put 10% tariffs on $300 billion in Chinese imports a year. If Trump enacts the tariffs next month, as he said Thursday he would do, the costs would rise for nearly everything China ships to the United States, from shoes to car parts to the latest gadgets.
On Friday, China’s Ministry of Commerce, which is heavily involved in the country’s trade policy, said it would “take necessary countermeasures to resolutely defend the core interests of the country and the fundamental interests of the people.”
Why it matters
China is grappling with how. China’s imports from the United States only a fraction of the trade going the other way, so it cannot match Washington tariff for tariff. Much of that trade consists of agriculture goods like soybeans, as well as specialized products like Boeing jetliners or the U.S.made chips for the smartphones China makes.
There are several things China could do. It could call for a boycott of U.S. goods or stop buying
Boeing planes. It could devalue its currency, which would in effect partially nullify U.S. tariffs. It could make life much harder for American business and executives in China, or it could exercise its power over key parts of the global supply chain, like its dominance over key manufacturing minerals called rare earths.
Some investors Friday signaled they expect at least one of those moves. China’s currency, the yuan, fell to its weakest point this year. Shares of rare earths companies rose, while Boeing’s shares fell more than the broader market Thursday.
But each of these measures has drawbacks. Perhaps the biggest among them is China’s economy is growing at its slowest pace in 27 years. Many of the arrows Beijing has in its quiver could ricochet and hit its factories and workers.
National strategy
Chinese officials have signaled in recent weeks that tackling sluggish growth is a necessity for prevailing in the trade war, especially as it looks to drag on for months or perhaps years. That prospect was made clearer still to Chinese leaders Thursday, as Trump’s latest threat came just one day after top U.S. negotiators concluded talks with their Chinese counterparts in Shanghai.
China’s top leader, Xi Jinping, has called on Chinese people to brace for a period of hardship. In recent months, the country’s central bank has allowed money to flow into infrastructure projects, a once-reliable recipe for growth that now threatens to add to a national mountain of debt.
‘The Chinese will no longer give priority to controlling trade war scale. They will focus on the national strategy under a prolonged trade war.’ Hu Xijin, editor of China’s nationalist tabloid Global Times