As the trade war intensifies, China tries to avoid a full-on fight
CHINA’S PROPAGANDA machine grinds slowly. But its output is nothing if not consistent. It took more than 24 hours for state media to report President Donald Trump’s threats, tweeted on May 5th, to ratchet up tariffs on China. By that time Chinese stocks had already plunged, a foretaste of global market ructions.
It is easy to imagine how China could punch back. Given its $380bn trade surplus with America, China is more vulnerable to tariffs. But American businesses, from Apple to General Motors, have big footprints in China. American firms made roughly $200bn more in sales in China in 2015 than Chinese firms did in America, according to Deutsche Bank. The Chinese government could whip up consumer boycotts. It could hold up supplies at customs. It could smother factories with safety inspections.
China’s decision to opt for a relatively conciliatory strategy can be explained in three ways. Most obvious is its desire to minimise the trade war. If America were to slap 25% tariffs on all imports from China, that could knock two percentage points off Chinese growth over the next 12 months, according to UBS, a Swiss bank.
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