China has wide variety of tools to employ against pressure of US trade protectionism

After China announced plans on August 3 to put additional tariffs of up to 25 percent on US products worth $60 billion, some observers expressed concern that Beijing is nearing its tariff retaliation limit.

Over the weekend, the South China Morning Post published an opinion piece indicating China is running out of retaliatory tariffs against the US. “Before the trade war gets more severe, Beijing’s leaders should seek direct talks with Trump, and may have to swallow their pride,” the article said.

It is not wise to draw simplistic conclusions about the unprecedented trade conflict between the world’s two largest economies. Exports and imports are just one part of Sino-US economic ties, thus the tit-for-tat retaliation over tariffs cannot give the full picture of the ongoing economic conflict.

With a strong central government, China is good at mobilizing all positive forces when it faces domestic and external uncertainties. All economic sectors including the stock, foreign exchange and labor markets need to be taken into account to maintain the overall stability of China’s economy while trying to find the weaknesses of the US economy. The macroeconomic pictures in both China and the US are complex and uneven. The outcome of economic conflicts will depend on combination of actions, instead of a single action.

There are complex factors constraining the ability of some governments in the West to mobilize economic resources, but the situation is different in China. The meteoric rise of the Chinese economy in recent decades was bound to be accompanied by complicated issues and turbulence such as bouts of severe inflation and waves of massive layoffs. China does not lack experience in using combination of actions to pull itself out of an economic crisis.

It is time for China to further strengthen its advantage in coordinating different economic sectors to form a resultant force against US trade protection measures. China is huge and its economy is complicated, so the government needs management skills to ensure coordinated development of different economic sectors. Difficulties caused by the trade dispute also provide a chance for China to strengthen its macroeconomic regulation.

China doesn’t want a fullscale trade conflict with the US, but will fight to the end to defend its national interests. China has various tools to use in combination against US trade protection measures, and the US economy will be equally affected in a bilateral trade conflict.