China’s Countermeasures in Place as Trump Threatens 60% Tariffs
Introduction
When Donald Trump began a trade war with China in 2018, Beijing faced a steep learning curve. Today, President Xi Jinping is prepared for a new confrontation as Trump threatens a 60% tariff on Chinese goods. Over recent years, China has built a toolkit to buffer its economy and counter external threats. Key strategies include export controls on essential materials, tariffs on U.S. agricultural products, and a robust “entity list” to target American companies.
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Strengthening Economic Resilience
In response to past U.S. tariffs, China has fortified its economy, diversifying import sources and promoting domestic industries. For example, exporting electric vehicles and batteries has helped offset economic pressures, and lawmakers are now considering additional measures to stimulate growth if Trump’s threats materialize.
Currency and Market Pressures
China’s financial markets are already reacting to the possibility of a new trade war. This week, the offshore yuan dropped 1.3% against the dollar, and Chinese stocks faced declines, signalling volatility. Economists like Alicia Garcia Herrero at Natixis believe China will deploy a “bigger stimulus” to protect its economy from market penalties if Trump imposes the tariffs.
Retaliation Ready, But Limited
While China is poised to retaliate, options are limited. Past measures included targeting U.S. agricultural goods—such as corn and soybeans—but the U.S.’s share in these imports has fallen, with countries like Brazil taking up the slack. Nonetheless, experts assert that China is “prepared to fight fire with fire” if necessary.
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Export Controls and U.S. Dependencies
One of China’s new tools is imposing export controls on critical raw materials, such as gallium and germanium, which are essential to chip manufacturing and defence industries. Beijing may consider further restrictions on materials like antimony, which is vital for American technologies.
In sum, China’s strategy is clear: ready to retaliate, but cautiously optimistic about finding a path to mitigate economic damages. Yet, Beijing is bracing for the volatility ahead, underscoring its preparedness, but it recognizes that there is “no silver bullet” to avoid the potential fallout of Trump’s tariff threats.