Chinese trade experts urge caution on Xi Jinping as he prepares best response to Joe Biden’s tariffs on $18 billion of Chinese imports, knowing a tit-for-tat battle could harm the slowing economy and exacerbate tensions during a politically charged U.S. election campaign. .
The US president on Tuesday sharply increased tariffs on Chinese products, including electric vehicles and solar cells, as part of a pre-election effort to protect American jobs.
Chinese dominance over clean technology supply chains means that Beijing has the potential to retaliate in the same way, limiting access to resources, materials and technologies essential to the US economy.
But former government officials and advisers in Beijing have warned of escalating tensions with Washington, just as Biden and his rival Donald Trump clash over who can be tougher on trade with China, six months before the American elections.
They also fear that Washington will pressure Europe to follow suit by cracking down on Chinese clean technology exports. Brussels is carrying out its own investigations into China’s electric vehicle, solar and wind power sectors.
“China has a high moral ground,” said Henry Huiyao Wang, a former senior government official and founder and president of the Beijing-based Center for China and Globalization. “We would like to see China ‘soaring’ rather than ‘going down’ with the United States. »
Zhang Yansheng, a senior researcher at the China Center for International Economic Exchanges, another government-affiliated think tank, said China should be “very careful” before imposing additional tariffs.
Zhang noted that Beijing’s previous retaliations – which were proportional in dollar terms to US measures – had been “ineffective” in slowing the trade war, while the impact of the latest tariffs on the real economy was not. “not substantial”.
“Last time, both sides – the United States engaging in a trade war and imposing tariffs, and China retaliating – actually harmed the United States, China and the world,” Zhang said. “However, I think criticizing them morally, and then urging the world not to go down that path, might be the most important work to do.”
Biden’s latest measure quadruples the tariff rate on Chinese electric vehicles to 100 percent, doubles the levy on solar cells to 50 percent and more than triples the rate on Chinese lithium-ion vehicle batteries electric at 25 percent.
Western experts said there would still be high domestic expectations for a response from Xi, China’s most powerful leader since Mao Zedong.
Beijing will look for a “hot spot” to show it is standing up to the United States without harming its own economic interests, said Benjamin Kostrzewa, a former trade official in Barack Obama’s administration and now a lawyer at Hogan Lovells, advisor on US-China relations. trade.
“China has its own domestic political considerations,” he said. “They will want to be seen as opposing what they see as American antagonism. Tit-for-tat countermeasures are China’s usual response in these situations, and it will not attempt to escalate, but it will undoubtedly issue measures of one sort or another.”
Beyond the latest tariffs, the United States has limited sales of key technology exports including high-end computer chips, imposed sanctions on hundreds of Chinese companies and is mandating the sale or ban of the Chinese application TikTok, among other measures.
Trivium, a Beijing-based consultancy, has studied many critical minerals considered vulnerable candidates for Chinese retaliation. The most likely would be tungsten, used in military applications, as well as the automotive and aerospace industries; rare earth elements used in magnets, computer chips, batteries and lasers; and vanadium, which also has broad military, industrial, and nuclear energy applications.
Analysts at the think tank Rhodium said that beyond export controls on critical material and technology inputs, Beijing could seek to retaliate by devaluing the currency, disrupting mergers and acquisitions or denying certain multinationals access to the Chinese market.
Simon Evenett, a professor of international trade at the University of St. Gallen in Switzerland, said China could surgically target the exports of seven battleground states during the upcoming U.S. presidential election.
“This is not a recommendation, but it raises the question: How many jobs would be at risk if China excluded exports from these states? And how big are these job losses compared to Joe Biden’s vote margin in the 2020 presidential election? ” he added.
In high-level meetings with their Chinese counterparts over the last year, U.S. officials have stressed that Washington will not hold back from taking national security and economic measures, even as the two countries try to stabilize their relationship.
Biden said Tuesday that China engaged in “cheating” by using unfair trade practices. But the new tariffs follow other recent measures aimed at protecting U.S. manufacturing and blue-collar jobs.
Cui Fan, a government trade adviser, said that while it was clear the U.S. election was “an important factor” in the tariffs, Beijing also needed to consider the impact of increasing U.S. trade restrictions on the Chinese economy .
“Competitive compression step by step throughout the industrial chain. . . deserves our attention because of its medium and long-term effects on the entire new Chinese energy sector,” he said.
Wang said the tariffs were “counterproductive” to global ambitions on climate change. “This really goes against what the United States has been preaching for decades. »
The U.S.-China trade war has affected about $450 billion in annual trade, according to the World Bank, and experts from the organization and the IMF, among other groups, have warned of significant suffering for the global economy, as well as for the United States and China. consumers and workers.
Hua Chunying, a spokesperson for the Foreign Ministry, said on X, which is banned in China, that “US protectionism will ultimately harm itself.”
She also posted a screenshot of Biden’s earlier language disparaging Trump’s tariffs as taxes borne by “the American people,” adding the caption “lesson about 2019 tariffs.”