China Has Limited Firepower to Counter U.S. Tariffs
While Beijing has already brandished the ways it could hit back at Trump’s levies, such retaliation risks boomeranging
SINGAPORE—In the weeks since the election, China has flaunted the ways in which it could hit back at the U.S. in the event of a new trade war with the U.S., including everything from choking off the metals needed for everyday products to punishing American companies that do business in China.
But using such tools too aggressively risks backfiring on Beijing.
The big danger is that taking shots at Western companies and restricting exports of critical minerals and other essentials will only encourage the U.S. and its allies to double down on their efforts to untangle their economies from China’s.
That would spell trouble for Beijing as long as it remains wedded to an economic model that relies so heavily on selling its goods to Western consumers.
While China can inflict pain on the U.S. with the economic tools at its disposal, it is more likely to wield them sparingly, according to analysts. Instead, Beijing could use the measures to force talks to negotiate a truce with Donald Trump should he follow through on his promise to impose 60% tariffs on Chinese imports.
“Just using these tools willy-nilly doesn’t make sense. You have to be driving towards an outcome, which is some sort of negotiation,” said Logan Wright, head of China markets research at Rhodium Group, a New York-based think tank.
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