China’s arsenal in its trade war against the United States

China US
File Indian Express

UNITED STATES (VOP TODAY NEWS) — Beijing’s decision to raise tariffs on US imports worth $ 60 billion a year from early June in response to a similar decision by Washington could strip China of its ammunition in the context of a trade war between the two countries.

China’s imports are four times less than its exports to the United States. Beijing charges nearly all US goods coming to China – $ 110 billion of an annual total of $ 120 billion.

Thus, if Beijing raises its fees to a level of up to 25 percent on a range of US goods including liquefied natural gas, chemicals, fruit, vegetables and seafood, this may limit its maneuvering space.

Here are some options for China:

– War cartoons? –

Harvard professor of trade and investment Robert Lawrence points out that “customs duties are a wound we cause ourselves when you raise import costs on your products.”

But he explained that in the midst of a trade war “economic considerations are secondary” because the issue “is more related to taking positions, bargaining and politics.”

Cars and parts coming from the United States face the prospect of a 25 percent tariff increase.

The move, announced by Beijing in December, has been suspended, but can be easily re-activated.

This key sector for the US economy is a key electoral base for President Donald Trump.

– devaluation of the yuan? –

Trump has repeatedly accused the Chinese central bank of devaluing the local currency to support exporters, but is this an option?

“It’s out of the question,” said Rajiv Biswas, Asia Pacific senior economist at IHSMarket.

“It is an unrealistic strategy for China to try to mitigate the impact of a 25 percent fee by allowing the yuan to retreat further,” he told AFP.

“Maintaining the stability of the exchange rate and avoiding large capital outflow has been one of the top priorities of the Chinese government since 2015 in an effort to protect its foreign exchange reserves,” he said.

“Therefore, it is unlikely that the Chinese government will want any weakening of the yuan leading to instability and causing a large outflow of capital abroad,” he added.

– Punishing business? –

China can make it harder for US companies in the country by tightening regulations or setting up tariff barriers.

Jake Parker, of the US-China Business Council, said the measures “will have a lot of support in China but will further undermine business confidence (overseas).”

If Beijing goes to this option, it will be “an escalation,” according to Jakob van Kerkgaard of the Peterson Institute for International Economics.

“Doing so carries the risk of Trump’s decision to repeat ZTE +,” he said, referring to Washington’s ban last year on the sale of electronic components of all kinds to the Chinese communications group, which was almost a knockout for the company.

The White House accused the company of violating the ban on Iran and North Korea. In the end, Trump agreed to reconsider the decision.

– Call for boycott? –

Can encourage Chinese not to buy the most prominent American products, such as iPhone phones.

With relations with Japan falling in 2012 or South Korea in 2017, provincial campaigns have caused car sales by both countries to fall 50 percent in a month.

But such a measure could be a punishment for millions of Chinese employed by US companies and their local partners.

– Giving up Boeing? –

China is key to Boeing, which sells a quarter of its aircraft.

An editor with the Chinese government-controlled Global Times newspaper said the country may reduce its orders from Boeing, although the US giant aircraft manufacturer has indicated its “confidence” about its status for Beijing.

At the end of March, Beijing finalized final demand for 300 aircraft from the European giant Airbus group during a visit by Chinese President Xi Jinping to France.

– Selling debt? –

The United States owes $ 1.2 trillion to China (the largest holder of US debt), but selling a large part of it is risky because any destabilization of markets would undermine the value of US Treasuries held by Beijing.

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