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Abacus | US-China trade war: here are Beijing’s options – and not one looks any good
- Hit by a hike in US tariffs China could: respond with equal tariffs (impossible); dump US Treasury bonds (ineffective and impractical); let the yuan weaken (expensive)
- Or it could give in to Trump and lose face (for Xi, unthinkable)
Reading Time:4 minutes
Why you can trust SCMP
From the volume of bellicose rhetoric in China’s state media, you might think Beijing is digging in for a bloody fight to the finish in its trade conflict with the United States.
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But after the US administration this month jacked up import tariffs on US$200 billion of Chinese goods to 25 per cent, and threatened equal tariffs on another US$340 billion, the Chinese government faces a problem.
The policy responses it is considering are all either impossible, impractical, ineffective or expensive. This leaves Beijing in an unenviable position.
The usual trade-war response to the imposition of tariffs is to impose countervailing tariffs of your own, inflicting enough pain on your antagonist to bring him back to the negotiating table.
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But that’s impossible in the US-China dispute. Yes, last week the Chinese government slapped 25 per cent tariffs on US$60 billion of imports from the US. But that just highlights Beijing’s problem.
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