Hong Kong/Beijing: China’s $3 billion counter punch to Donald Trump’s tariffs is just the first move from the world’s second-largest economy. History suggests it won’t be the last.
The Commerce Ministry in Beijing said it will impose import taxes on the US, including a 25% tariff on US pork imports and recycled aluminium, and 15% tariffs on American steel pipes, fruit and wine.
But that is only the tip of a long list of options if trade tensions with the US worsen. Here’s a look at other ways China can strike back at America’s $130 billion of annual exports to China.
Chinese media have mentioned Boeing Co. as a key target in a trade war. President Xi Jinping gave Boeing a $38 billion order on a 2015 plant visit in Seattle, and China could retaliate by cancelling those orders and shifting to Airbus, for example. There’s also the government procurement market, which China says is worth ¥3.1 trillion ($490 billion). This is one option because China isn’t a signatory to the World Trade Organization’s rules on government procurement.
Farming is on the forefront of any trade war as it’s one of the few sectors where US exporters run a surplus with China. China’s the biggest buyer of US soybeans, taking $14.6 billion worth in the last marketing year —more than a third of the entire crop. Sorghum is also said to be on the hit list.
While the genesis of the latest US measures against China are meant to protect American intellectual property and technology, that doesn’t mean Silicon Valley will be shielded from the crossfire. Apple Inc., Intel Corp. and Cisco Systems Inc. are among those vulnerable to a backlash.
Another option is for China to impose special additional duties on locally made products exported to the US Companies like Apple and other consumer goods and electronics giants would suffer if China imposes a duty on exported products. Such a move would hit US companies and consumers hard, though it would also hurt Chinese firms.
The US recorded a $38 billion services trade surplus with China in 2016. Some of the leading services exports from the US to China include travel; IP, such as trademarks; and computer software, according to the US Trade Representative’s Office. China could also restrict the number of students who go to US universities.
China can quickly throw up non-tariff obstacles to trade, stepping up safety inspections and delaying paperwork essential for goods to make it into the country. It’s an under-the-radar approach China has often used to advance its geopolitical goals in Asia. They can also disrupt the operations of US multinationals in China. That could include anything from actions by customs officials, financial regulators, quality inspectors, antitrust bodies, environmental authorities, consumer groups or economic planning bodies.
The nuclear option would be a deliberate devaluation of the yuan to make China’s exports more competitive. Such a move would send shock waves through global markets, which is probably why it’s not an immediate lever that Beijing wants to pull. Bloomberg