If Trump Slaps Bigger Tariffs on Chinese Goods, Beijing Has Ways to Retaliate
China has spoken. Beijing has issued a dire warning, should President-elect Donald Trump exercise his threat of launching a trade war against it. Chinese officials said they would adopt “an eye for an eye” approach, which would penalize many American companies. (Source: “China: iPhone Sales Will ‘Suffer’ If Trump Pursues Trade War,” Forbes, November 14, 2016.)
Chinese officials issued the warning, responding to Trump’s campaign accusations against China. The new U.S. president called China a “currency manipulator,” warning that he would smack Chinese goods with a 45% tariff. Trump didn’t confirm this during a recent 60 Minutes interview (on the CBS Network). However, China has taken preemptive steps, just in case it comes to that.
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China, in fact, has considerable leverage in its trade relationship with the United States. Chinese airlines, which are among the fastest-growing in the world, have ordered hundreds of Boeing Co (NYSE:BA) airplanes, many of which have not been delivered yet (making the cancellations easier). Any major U.S. action on trade, deemed aggressive, could prompt Beijing to cancel the Boeing orders and go to Airbus Group SE (EPA:AIR) instead.
Then there are other American companies which could suffer. China could hurt General Motors (NYSE:GM)—which sells many cars in China—by reducing imports of “Buick” sedans, which are rather popular there. Apple Inc. (NASDAQ:AAPL) products, from the “iPhone” to the “iPad,” would drop considerably. China can also play the soybeans and corn card, halting imports of these important crops for the U.S. economy. (Source: “Will Trump start a trade war against China?,” Global Times, November 13, 2016.)
None of the previous presidents have been bold enough to launch an all-out trade war against China, suggested the Global Times editorial. But it would be difficult for Trump to follow through. The new President has already acted more diplomatically with China than anyone expected. He would also find it difficult to slap any more than a 15% tariff according to Song Guoyou, a professor at Fudan University’s Center for American Studies. (Source: “Trump’s trade threats ‘almost impossible,’ economists say,” Global Times, November 15, 2016.) President Barack Obama, in fact, wanted to issue a 35% tax on Chinese tires. China replied with a tax on cars and chickens from the United States. (Source: “The Problem with Trump’s Protectionist Tariffs,” National Review, March 8, 2016.)
