BEIJING – When Donald Trump first started a trade war with China in 2018, Beijing found itself on the back foot and unsure of how to respond. This time President Xi Jinping is better prepared for a fight, even as he has more to lose.
Trump, who won a second term as US president, has threatened to put tariffs of as much as 60 per cent on Chinese goods, a level that Bloomberg Economics says will decimate trade between the world’s biggest economies. That’s on top of a range of export controls on advanced technology that the Biden administration has only tightened since Trump left office.
In that time, China has taken strategic steps to ensure it’s more resilient and well positioned to strike back. Key to that has been expanding its toolkit, which now includes export controls on critical raw materials, in addition to tariffs on agricultural goods and an entity list that can target key American companies.
Still, Xi would much prefer to avoid a tariff battle that risks proving much more devastating than the first round. China has relied on exports of goods like electric vehicles and batteries to buoy an economy beset by deflationary pressure and property woes, and Chinese lawmakers are meeting this week to formulate measures to bolster growth.
If Trump follows through on his tariff threats, Chinese authorities will need to do much more to help the economy. Goldman Sachs Group said last week that steeper trade restrictions on China may force Xi’s hand to bolster domestic consumption, something the Communist Party has traditionally sought to avoid.
“China can hardly retaliate on 60 per cent tariffs,” said Alicia Garcia Herrero, Asia Pacific chief economist at Natixis. “What China will do is to announce a bigger stimulus to counteract so that the market