China will respond and it will hurt both countries
China is likely to respond directly to Donald Trump’s plan to impose tariffs on up to $60bn of goods and trigger a bilateral trade war that will hurt both countries, experts have said.
Mr Trump campaigned for the White House with a promise to secure “better deals” between the US and its trading partners, claiming that previous administrations had allowed American firms and workers to lose out. Having announced tariffs on steel and aluminium imports earlier this month, he signed an order opening the way to punish China for what he said was the theft of US technology.
“It is the largest deficit of any country in the history of our world,” Mr Trump said of the US-China trade imbalance.
But experts said Beijing would not take the move lying down. Rather, China was likely already preparing to respond, and possibly in ways the US might not initially notice.
“I think we are making policy as if we are still the dominant superpower in the world,” Robert Ross, professor of political science at Boston College, told The Independent. “But China has become a major power and a major market, and it has the ability to retaliate.”
He said in recent years, China had imposed, or threatened to impose, its own tariffs on several countries, including Japan, Norway and Germany, as part of a broader political strategy. Germany’s Daimler carmaker was forced to make a humiliating apology to China earlier this year after one of its adverts featured a quotation from the Dalai Lama, the Tibetan leader whom China regularly denounces and accuses of trying to split the country.
“They have ways to impose a cost,” Mr Ross said of China’s way of responding. “Suddenly, they impose a block on soy bean imports, or they start asking questions about an American car’s emissions standards.” He said if China did not respond, it would fear that other countries might seek to follow the US’s actions. Mr Trump has talked of trying to develop a “coalition” of countries to impose tariffs on China but Mr Ross said he doubted it would get far.
Susan Helper, professor of economics at Case Western Reserve University in Ohio, said she was not certain the US tariffs would spark a trade war. She said many powerful people in both countries were making lots of money from the current arrangements, even though Chinese workers were frequently labouring in Victorian-era sweatshop conditions.
She said she was glad Mr Trump was trying to address the issue of China’s appropriation of intellectual property, which was not properly regulated in China. She added: “That is a long-overdue conversation.”
Scott Kennedy, an expert on the Chinese economy at the Centre for Strategic and International Studies in Washington, said China might also opt for straight retaliation, in the form of tariffs on imports such as soy beans or aircraft. Alternatively, it could target major US firms that do a lot of business in the country, such as Apple and Intel.
Some analysts believe in order to minimise the damage of the tariffs, Beijing may consider easing restrictions on imports from the US.
“This is a negotiation,” Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, an investment bank, told the Deutsche Welle news agency. “China could offer to import from the US, when they might have thought about importing from somewhere else.”
Other analysts agree that China will seek to calm the situation.
“China does not want to see an escalation of tension,” Aidan Yao, senior emerging Asia economist at AXA Investment Managers, told CNN. “Instead, Beijing wants to manage the relationship.”
The White House said yesterday that Mr Trump would direct the Office of the US Trade Representative to publish a list of proposed tariffs for public comment within 15 days. It has already identified potential targets totalling 1,300 product lines.