China Readies ‘Heavy Artillery’ as Trump Signals Preparations for New Trade War

On the campaign trail, Donald Trump threatened repeatedly to impose crushing tariffs of 60% or more on all imports from China, echoing tough rhetoric from his first stint as president, which culminated in a full-blown, multi-trillion-dollar trade war with the Asian giant. But Beijing is far better prepared this time, analysts say.

China has “powerful countermeasures” at the ready to target US interests at a moment’s notice if President-elect Trump pulls the trigger on a new trade war against Beijing, Chinese advisors, risk analysts and trade experts told the Financial Times, indicating that the legal architecture China has at its disposal in preparation for Trump 2.0 are far more potent than they were eight years ago.

“This is a two-way process. China will of course try to engage with President Trump in whatever way, try to negotiate. 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,” Peking University Institute for Global Cooperation and Understanding director Wang Dong told the outlet.

Unlike last time, China’s options for retaliation now include a powerful “anti-foreign sanctions law” passed in 2021, which allows for tit-for-tat countermeasures against a wide range of actors and actions which China perceives as harmful.

An “unreliable entity list” passed in late 2020 allows China to cut major US brands out of the massive and highly lucrative Chinese consumer market.

On top of that are China’s export control measures – continuously updated and expanded, allowing Beijing – the largest producer of rare earth metals, to restrict exports of these critical resources to hostile nations.

“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’,” Control Risks consultancy China expert Andrew Gilholm said.

With the Biden administration continuing elements of Trump’s China policy, Beijing has so far used only the “arrows” in its quiver, rather than the heavy artillery, an anonymous former US trade official said.

“That constraint is still there and that internal tension in China still exists, but if there are 60% tariffs or real hawkish intent by the Trump administration, then that could change,” the official warned.

China could also use cross-the-board US trade measures to ramp up exports and imports to and from other major markets, observers say.

“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 favorable export markets,” US-China trade analyst Joe Mazur said.

The sentiments of experts queried by FT echo those of other media, with a NYT analysis earlier this week warning that China has become less dependent on American markets, and pursuing an economic strategy of self-sufficiency, thanks in large part to US pressure. The piece pointed to Beijing’s unique ability to stimulate growth via low borrowing costs, debt refinancing, and highlighted the state-led push to turn China into an EV and ‘clean energy’ tech superpower as an example of the government’s ability to plan and coordinate growth – tools the US and other major market-oriented economies lack.

With China’s share of US imports dropping from 20% in 2018 to about 13% today, the Trump administration’s ability to pressure, prod and bully Beijing into submission on trade isn’t what it once was, NYT added.

“Beijing is using the Global South to offset the loss of market share to the West,” Chatham House senior researcher Jie Yu told that paper.

That includes imports too, with China shifting the purchase of part of its agricultural needs, which it once predominantly bought from the US, from countries like Brazil and Argentina.

“China has more leverage than the first time around. It has a range of tools it can mobilize to push back and put some hurt on the US economy if it believes Trump is pursuing outright economic war,” Center for Strategic and International Studies China expert Scott Kennedy said.

?Trade War or Truce

Despite hostility on trade, Trump said repeatedly on the campaign trail that he plans to “get along great” with China, and that he has a great deal of respect for Chinese President Xi Jinping and his ability to wield power in such a large country.

Xi congratulated Trump on his election victory last week, expressing hopes that communication between the economic superpowers will allow them to “properly manage differences,” and “find a correct way for China and the United States to get along in the new era, so as to benefit both countries and the world.”

Trump’s cabinet picks appear to tell another story, with the Republican tapping his former trade representative Robert Lighthizer – architect of the first trade war with China, to return to the role.

Lighthizer told The Economist in March that the US’s “bold experiment” of tariff-free trade policy had “failed,” and that cross-the-board duties of at least 10% are needed “to reduce America’s trade deficit and to speed up its reindustrialization.”

Trump’s antagonistic policy on trade with both friends and allies alike stems from his long-held view, expressed from at least the mid-1980s onward, that the US has been clobbered on trade and suffered deindustrialization thanks largely to a lopsided and prejudicial trade policy favoring exporting countries.