China seems to be doing very little to prepare for the incoming Trump administration’s proposed tariffs and other trade matters.
Commentary
A recent Wall Street Journal article describes China as ready to “come out swinging” in response to the looming trade war Trump has promised. However, a careful analysis of the facts on the ground suggests little in the way of such preparations.
To continue with the boxing metaphor, China seems ready to jab at opportunities as they arise. Though perhaps Beijing, in the event, will muster more power punches, the implication is that China’s weak economy has made jabbing the most that Beijing can do.
During the election campaign, Trump floated the idea of at least 10 percent tariffs on all of America’s trading partners and at least 60 percent tariffs on Chinese goods entering the United States. Of late, some ambiguity about these figures has emerged as Trump’s spokespeople have spoken of additional tariffs of 10 percent where China is concerned. This kind of uncertainty is pure
Trumpian negotiating tactics. He throws up different figures at different times to unbalance his adversaries and gain concessions by leaving them unsure of what he is willing to do.
If Chinese authorities don’t yet know what level Trump will set tariffs at, they know this for sure: The tariffs that Trump imposed on Chinese imports in 2018 and 2019 during his first term remain in force. Though President Joe Biden criticized these tariffs during the 2020 presidential election campaign, his trade representative, Katherine Tai,
explained that he kept them in place to pressure Beijing to abandon the unfair trade practices that prompted the Trump tariffs in the first place.
The Chinese Communist Party (CCP) also knows that the
Biden White House, with bipartisan support from Congress, pursued the trade war with China at least as aggressively as Trump did, imposing 100 percent tariffs on electric vehicles and parts as well as batteries, offering subsidies for semiconductor manufacturers to place facilities in the United States, and blocking the sale of advanced semiconductors and advanced semiconductor manufacturing equipment to China.
The CCP also knows that Trump is hardly likely to rescind any of these Biden measures, except in the unlikely event that China makes concessions on the original disputed trade practices. Even if there is no doubt about how much higher Trump will build the tariff wall, Chinese officials know that he will add to its height. They can also surmise that wherever Trump initially sets the new tariffs, he will raise them if the negotiations with Beijing do not go well, which is in Washington’s favor.
China’s countermeasures to date are hardly likely to intimidate today’s Washington, and certainly not a Trump administration. Beijing has launched a regulatory probe into the U.S. firm Nvidia, a semiconductor manufacturer with leading artificial intelligence capabilities.
The CCP has also threatened to blacklist the products of certain American apparel makers and slowed or blocked the export to the United States of drones and what Beijing describes as “critical materials,” which, if past behavior is any guide, means rare earth elements.
No doubt such actions by the CCP will hurt the U.S. economy, at least at the margin, and prompt lobbying by the affected firms, but otherwise, moves like this on Beijing’s part play into Trump’s broader effort to add to domestic U.S. production capacities and otherwise limit China’s stature globally.
One area where China could hurt the U.S. economy is in simpler computer chips, which are called “mature” or “legacy” chips. Though Biden’s restrictions have stymied China’s progress in producing advanced chips, the nation’s chipmakers—such as Semiconductor Manufacturing International (or SMIC) and Hua Hong Semiconductor—have gained global advantage in these simpler “legacy” semiconductors. They are essential in automobiles and household appliances.
American dependence on imports became apparent in 2021 when shortages in just these areas impeded the U.S. economy’s ability to recover from the COVID-19 pandemic. China cannot yet claim dominance, but it has increased its stature in global supply chains from 14 percent in 2017 to 18 percent in 2023, the most recent period for which complete data are available.
As much as this area might give Beijing leverage in negotiations with the Trump White House, Chinese officials are probably reluctant to play such a card. They know that China’s troubled economy relies heavily on exports of these products to the global market, notably the United States. Indeed, with the collapse of China’s property market leading to declines in construction activity, consumer spending, and private investment, China has become increasingly dependent on exports, particularly these “legacy” chips, including to the United States. This points to Beijing’s basic disadvantage: Although an interruption in U.S.–China trade would hurt both economies, China is more reliant on trade with the United States than vice versa.
In light of Trump’s proposed tariffs, were Beijing to stimulate the domestic Chinese economy through building, consumer spending, and capital spending by private Chinese businesses, it could lower China’s reliance on exports and trade with the United States, and therefore be in a stronger negotiating position with Trump.
But so far, Beijing hasn’t done this. And any prospect of bolder stimulative moves seems set to wait until the CCP’s rubber-stamp legislature meets in March. By then, Trump will have been in office for almost two months. Coming out “swinging,” indeed.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
