A superpower strikes back—China’s possible retaliatory measures vs. latest US tariffs

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With the news that President Donald Trump announced that more tariffs will be imposed on US$200 billion (S$275 billion) worth of goods from China beginning next week, September 24, the question remains as to what China will do to retaliate against these latest levies.

To start with, it’s highly likely that China in turn will levy additional taxes against US imports, though one must take into consideration that imports from the US are relatively few, and are certain to shrink even more due to the growing anti-US sentiment in the country. The Commerce Ministry of China already announced that it is prepared to levy tariffs on US$60 billion worth of US goods in response to President Trump’s announcement.

One weapon in China’s arsenal against the US is for the Asian economic giant to open even more of its markets to other nations, including its financial sector. If China gives Australia, Canada, and other nations from Asia and Europe access to its markets, this will surely hurt the US. Washington will feel the pressure as China expands economically without it, and as economic cooperation between China and other nations increases.

At a speech delivered at the Development Forum, Lou Jiwei, who used to be China’s finance minister and upon retirement became a senior Communist Party advisor, said that China could possibly stop specific exports to the US that are necessary for US businesses’ supply chains.

It will, according to Mr. Lou, take a long time for America to find substitute suppliers.  “To take a step back, the United States can establish an alternative supply chain in a third country, but it takes time — what about the pain of three to five years? This is enough to cross a political cycle.”

In addition to all this, of course, is the fact that China continues to block sites such as Google and Facebook in the country, citing well-founded security concerns.

The US’ tariffs are designed to bring China back to the negotiating table, which China seems to be willing to do, albeit with some conditions of its own. Beijing has been open about wanting concessions from the US, including restraining the Commerce Department’s powers to levy tariffs on imported goods which are subsidized by the government, or sold at lower than cost of production. Both the Obama and Trump administrations said no to this, citing that the US market is already a very open one.

Pundits in the US have expressed their concerns that ultimately, these additional tariffs on China’s goods will hurt the US even more than it will hurt China, including a loss of thousands of jobs.

A spokesman for a business group formed to fight tariffs called Tariffs Hurt the Heartland, Jonathan Gold, said,  “These tariffs are going to be paid for by the working families who drive our economy. Tariffs are taxes, plain and simple. By choosing to unilaterally raise taxes on Americans, the cost of running a farm, factory or business will grow. In many cases, these costs will be passed on to American families.”

Members of the tech industry have also expressed their alarm. The  chief executive of the Consumer Technology Association, Gary Shapiro, said, “Today’s retaliatory tariffs are not an effective trade policy and may violate US law. We urge the administration to reconsider its misguided approach of increasing tariffs, as they are directly paid for by American companies and consumers.”

While the effects of the tariffs have not been felt by consumers so far, should almost all of Chinese goods be imposed with additional taxes, the effects will be self across the economy.

However, Larry Kudlow, the director of the National Economic Council, said that he sees no problems with the tariffs for the immediate future. With respect to the impact of tariffs, we’ll see. We’re following it. We don’t see any problems so far. I don’t see any reason to believe at the present time that the president’s trade reforms are going to damage the economy.”