By EMILY WANG FUJIYAMA, Associated Press
BEIJING (AP) — A reordering of global trading relationships could be underway as the world’s two largest economies clash and relations spiral into a trade war. On Friday, Beijing raised its tariffs on U.S. goods from 84% to 125%, starting Saturday, after the U.S. pushed its tariffs on Chinese products to a total of 145%.
Early on, China retaliated against imports of American farm products like beef and pork and imposed export controls on strategically vital minerals. It has targeted big companies like DuPont China and Google with antitrust investigations and reduced the number of Hollywood films shown in Chinese cinemas.
Experts say there are still more options if U.S. President Donald Trump keeps upping the ante. Here’s the latest on what China has done, and what could come next:
What has China done so far?
Apart from higher tariffs, export controls and retaliation against specific U.S. companies, Beijing also has filed lawsuits at the World Trade Organization.
It has issued a travel advisory telling its citizens to evaluate risks of visiting the United States in a time of deteriorating relations.
The China Film Administration, which approves imports of Hollywood films, limiting foreign films to 34 a year, said it would “appropriately reduce” the import of American movies. China requires that revenues from films shown be shared and is Hollywood’s second largest market.
China is also reaching out to other countries on dealing with Trump’s tariffs and trying to shore up support over trade. This week, Commerce Minister Wang Wentao spoke with his counterparts at the European Union, the 10-member Association of Southeast Asian Nations, Saudi Arabia and South Africa. Next week, President Xi Jinping will travel to Vietnam, Malaysia and Cambodia, a trip that his Foreign Ministry said would inject “new momentum into regional and global peace and stability.”
Is China going to raise tariffs further? What else can it do?
China on Friday raised tariffs on U.S. goods to 125% from 84%, starting Saturday. “If the US continues to play the tariff numbers game, China will ignore it” the Commerce Ministry said in a statement. It left room for further retaliation. “If the U.S. insists on continuing to substantially infringe on China’s interests, China will resolutely counterattack and fight to the end,” it said.
The Chinese economy was already sluggish before Trump began his tariffs war, and analysts expect Beijing to look for ways to help allay the pain for the economy.
Premier Li Qiang has met with business leaders to signal government support for dealing with “all kinds of uncertainties,” promising “incremental policies according to the needs of the situation.”
State media have hinted that the Chinese central bank could cut interest rates and banks’ reserve requirements to free up more cash for lending.
Chinese sovereign wealth funds, the Central Huijin, and other state institutions have stepped in as part of what’s known as the “national team” to support the markets, buying up shares and raising their holdings of ETFs.
China’s yuan could weaken, making its exports more affordable, but there are limits to how far Beijing is willing to depreciate the currency, which would weaken investment returns and strain markets further.
“After the first round of the trade war starting in 2018, the Chinese leadership has learned how to deal with Trump and his team” says Chen Zhiwu, professor at the Hong Kong University Business School. “There has been a lot of preparation for this type of trade war to come up,” he said.
Will there be talks between US and China?
Experts are watching for signs of whether negotiations might happen. Chinese officials have repeatedly said they are open to talks, but it’s unclear whether Beijing is open to making any concessions.
“The door is open for talks,” said Commerce Ministry spokesperson He Yongqian, “but dialogue must be conducted on an equal footing and on the basis of mutual respect; and China will fight to the end.”
President Xi managed to limit the damage from Trump’s first term, when he launched tariff hikes and other sanctions to try to win more favorable trade terms for U.S. products. As head of the ruling Communist Party, he has won praise from Trump himself for his stance as a strongman and has plenty of experience in political maneuvering.
“China is unlikely to change its strategy: stand firm, absorb pressure, and let Trump overplay his hand” writes Daniel Russel, vice president of international security and diplomacy at the New York-based Asia Society Policy Institute. “Beijing believes Trump sees concessions as a weakness, so giving ground only invites more pressure.”
How might the US tariffs affect Chinese companies?
Some Chinese companies that saw the first trade war during Trump’s first administration have buffered the impact by selling to other markets and adjusting their supply chains. Many have absorbed higher costs and accepted let profit margins shrink further. Many exporters say they are still watching to see what comes next before deciding on whether to move or just quit.
A large share of Chinese exports to the U.S. are relatively cheap, low-tech items like toys, furniture, appliances and apparel. But China also imports many high-end products and components such as semiconductors, aircraft and aircraft parts, pharmaceuticals and industrial machines.
China has invested heavily in developing advanced technologies such as the design and manufacturing of computer chips to help reduce its reliance on imported technology. Yet it lags behind in key areas. Across-the-board U.S. tariffs on higher-end products and semiconductors will hurt.
Associated Press writer Fu Ting in Washington contributed to this report.
