Mon, 24 Sep 2018

China uses strategy as it vows retaliation in trade war

By Sheetal Sukhija, Shanghai News
13 Jul 2018, 07:52 GMT+10

BEIJING, China - In an escalating trade dispute that has threatened to impact global economic growth, the Chinese government has vowed to retaliate against the U.S. President Donald Trump’s latest salvo.

The U.S. this week, threatened to expand tariffs to thousands of Chinese imports like fish sticks, apples and French doors, inciting an angry response from China, which has vowed to take “firm and forceful measures.”

Earlier this week, the U.S. Trade Representative announced a possible second round of tariff hikes, targetting a $200 billion list of Chinese goods. 

The move by America came four days after the Trump administration added 25 percent tariffs on $34 billion worth of Chinese goods, to which, Beijing responded by increasing taxes on the same amount of American imports.

In response to Washington’s latest threat, China has not elaborated its response, but experts fear that its retaliation could extend beyond additional tariffs on U.S. imports. 

Experts are warning that an angered Beijing could attempt to disrupt operations of American automakers, retailers and others that see China as a key market.

However, on Thursday, China, which has long been accused of protectionist tactics that make it a difficult place for foreign firms to operate, tried to employ strategy, in its response to dealing with the Trump administration.

Following Trump’s latest threat, China sought to reverse its protectionist narrative and even gave its nod to huge investments - all in a bid to portray itself as a champion of openness.

China agreed to a $10 billion petrochemicals project by Germany’s BASF that will be the first wholly foreign-owned plant in China.

Further, the country approved a huge new wholly-owned Shanghai factory for U.S. electric car maker Tesla Inc.

It also gave the green signal to a $2.3 billion joint venture organic light-emitting diode (OLED) plant to be built by South Korea’s LG Display Co Ltd.

The actions were revealed after China’s Assistant Commerce Minister Li Chenggang delivered an official response to the Trump administration’s latest plan to slap 10 percent tariffs on an extra $200 billion worth of Chinese imports.

Chenggang said that China would not close itself to U.S. business and added at a business forum in Beijing, “I want to stress that the Chinese government’s attitude to support business cooperation between the two countries will not change, its determination to push forward reforms and improve the business environment will not change, and its stance of opposing unilateralism and supporting multilateralism will not change.”

Then, in an apparent jab at Trump, Chenggang borrowed a phrase used by former U.S. First Lady Michelle Obama in the 2016 U.S. election campaign and declared, “They go low, we go high.”

Meanwhile, the new list of products threatened includes vacuum cleaners, furniture, auto and bicycle parts, French doors and plywood. It left untouched U.S.-branded smartphones and laptop computers.

Experts however, have pointed out amid an escalating trade war, the foundations of which were laid by Trump - that China imports far less from the U.S. than the U.S. imports from China. 

This, experts claim means that China’s imports of U.S. goods are so small that Beijing cannot match fresh U.S. tariffs.

According to government figures, China bought $130 billion of U.S. goods last year. 

With both governments raising tariffs on $34 billion worth of each other’s goods and already declaring that they are considering additional charges on another $16 billion - this would leave China only $80 billion for further retaliation.

Seemingly aware of this, China has directed its niceties towards Europe - with the chinese Premier Li Keqiang visiting Germany this wee. 

During his visit, the two countries signed commercial accords worth $23.5 billion (20 billion euros), including the crucial BASF agreement.

Framing this cooperation in the context of the increasingly bitter trade dispute with Washington, China’s nationalist tabloid, the Global Times, said in an editorial, “The trade war should push China and the EU to cherish mutual cooperation, because this increasingly scarce cooperation is becoming more valuable.”

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