China has ready highly effective countermeasures to retaliate in opposition to US corporations if president-elect Donald Trump reignites a smouldering commerce struggle between the world’s two greatest economies, based on Beijing advisers and worldwide threat analysts.
Chinese language chief Xi Jinping’s authorities was caught off-guard by Trump’s 2016 election victory and the next imposition of upper tariffs, tighter controls over investments and sanctions on Chinese language corporations.
However whereas China’s fragile financial outlook has since made it extra susceptible to US strain, Beijing has launched sweeping new legal guidelines over the previous eight years that permit it to blacklist overseas corporations, impose its personal sanctions and lower American entry to essential provide chains.
“This is a two-way process. China will of course try to engage with President Trump in whatever way, try to negotiate,” mentioned Wang Dong, govt director of Peking College’s Institute for International Cooperation and Understanding. “But if, as happened in 2018, nothing can be achieved through talks and we have to fight, we will resolutely defend China’s rights and interests.”
President Joe Biden maintained most of his predecessor’s measures in opposition to China, however Trump has already signalled a fair harder stance by appointing China hawks to vital roles.
China now has at its disposal an “anti-foreign sanctions law” that permits it to counter measures taken by different international locations and an “unreliable entity list” for overseas corporations that it deems to have undermined its nationwide pursuits. An expanded export management regulation means Beijing may weaponise its international dominance of the provision of dozens of assets corresponding to uncommon earths and lithium which might be essential to fashionable applied sciences.
Andrew Gilholm, head of China evaluation at consultancy Management Dangers, mentioned many underestimated the injury Beijing may inflict on US pursuits.
Gilholm pointed to “warning shots” fired in latest months. These included sanctions imposed on Skydio, the most important US drone maker and a provider to Ukraine’s navy, that ban Chinese language teams from offering the corporate with crucial elements.
Beijing has additionally threatened to incorporate PVH, whose manufacturers embrace Calvin Klein and Tommy Hilfiger, on its “unreliables list”, a transfer that might lower the clothes firm’s entry to the large Chinese language market.
“This is the tip of the iceberg,” Gilholm mentioned, including: “I keep telling our clients: ‘You think you’ve priced-in geopolitical risk and US-China trade warfare, but you haven’t, because China hasn’t seriously retaliated yet’.”
China can also be racing to make its expertise and useful resource provide chains extra immune to disruption from US sanctions whereas increasing commerce with international locations much less aligned to Washington.
From Beijing’s perspective, whereas relations with the US had been extra secure in the direction of the top of Biden’s presidency, the outgoing administration’s insurance policies had largely continued in the identical vein as in Trump’s first time period.
“Everyone was already expecting the worst, so there won’t be any surprises. Everybody is ready,” mentioned Wang Chong, a overseas coverage knowledgeable at Zhejiang Worldwide Research College.
Nonetheless, China can not calmly dismiss Trump’s campaign-trail risk to impose blanket tariffs of greater than 60 per cent on all Chinese language imports, given slowing financial development, weak confidence amongst customers and companies and traditionally excessive youth unemployment.
Gong Jiong, professor at Beijing’s College of Worldwide Business and Economics, mentioned that within the occasion of negotiations, he anticipated China to be open to extra direct funding in US manufacturing or to transferring extra manufacturing to international locations Washington discovered acceptable.
China has been struggling to spice up the financial system amid doubts about its means to hit this yr’s official development goal of round 5 per cent, certainly one of its lowest targets in a long time.
A former US commerce official, who requested to not be named due to involvement in energetic US-China disputes, mentioned Beijing had been surgical in utilizing the “arrows” in its quiver, cautious of additional eroding weak worldwide funding sentiment.
“That constraint is still there and that internal tension in China still exists, but if there are 60 per cent tariffs or real hawkish intent by the Trump administration, then that could change,” the previous official mentioned.
Joe Mazur, a US-China commerce analyst with Trivium, a Beijing consultancy, mentioned Trump’s wider “protectionist streak” may work in China’s favour. The president-elect has pledged to impose tariffs of at the least 10 per cent on all imports to the US.
“Should other major economies begin to view the US as an unreliable trade partner, they could seek to cultivate deeper trade ties with China in search of more favourable export markets,” Mazur mentioned.
Nevertheless, others imagine Beijing’s deliberate countermeasures will threat hurting solely Chinese language corporations and its personal financial system in the long term.
James Zimmerman, a accomplice with regulation agency Loeb & Loeb in Beijing, mentioned the Chinese language authorities is likely to be “wholly unprepared” for a second Trump time period, together with “all the chaos and lack of diplomacy that will come with it”.
Zimmerman mentioned a key cause why commerce tensions may resurface was Beijing’s failure to fulfill obligations agreed in a 2020 cope with the primary Trump administration that known as for substantial Chinese language purchases of US items.
The “smart” motion from Beijing could be to do no matter it may to stop additional tariffs from being imposed, Zimmerman mentioned.
“The likelihood of an expanded trade war during the US president-elect’s second term is high,” he added.
Further reporting by Haohsiang Ko in Hong Kong and Wenjie Ding in Beijing
