Preparing for the Worst: China's Readiness for Intensified Trade War with the USA
United States-China trade conflict escalates: China gearing up for potential severe outcomes - U.S.-China customs dispute leads to China's preparations for potential escalation
In the heated trade battle with the US, China's ruling Communist Party is getting ready to brace for a potential worsening of the situation. A high-level meeting led by Party Chief Xi Jinping, reported by Xinhua, emphasized the need for China to fortify its economy and society against escalating external shocks.
To ensure a sustainable recovery, economic tools have been flagged for improvement, with timely political measures lined up. Beijing is also considering adopting a flexible monetary policy and lowering interest rates when necessary.
Boosting domestic consumption
Regarding specific measures, fewer details were provided. However, the focus is on increasing the earnings of lower and middle-income groups to fuel domestic consumption, thereby driving economic growth. Companies affected by tariffs will receive additional support.
The ongoing trade squabble between China and the US continues, following conflicting statements from both sides about ongoing negotiations. Despite US President Trump imposing tariffs of up to 145% on Chinese goods, he commented on meetings with the Chinese delegation. China, in turn, denied any progress and termed Trump's claims as fake news.
Signs of loosening tensions?
There appears to be a slight easing in the tech dispute between the two economic giants. Media outlets reported, based on industry sources, that Chinese customs authorities have temporarily waived tariffs on certain semiconductors. This move could signal a softening in the conflict. China relies heavily on imports of semiconductor technology, which is primarily sourced from US technology giants.
Export restrictions on raw materials
However, China tightened restrictions on the export of crucial raw materials and magnets at the beginning of the month. This move could potentially impact US industries that rely on these materials for auto, energy, and defense production. China has reserved the right to adjust its tariff policy further if the US does not comply with its demands.
- China
- Trade War
- Beijing
- USA
- World Trade
- Communist Party
- Economic Situation
- Xinhua
- Xi Jinping
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Rising Stakes in the Trade Dispute
- Export Restrictions: China has imposed restrictions on exports of rare earth elements and magnets which are vital components in U.S. auto, energy, and defense products[1]. This move is perceived as a response to escalating trade tensions.
- Tariff Policy: Despite raising tariffs to 125%, China has stated that it will not increase them further. China, however, emphasizes that there can be no talks unless the US rolls back its tariffs[1].
- Government Approval for Exports: The Chinese government now requires approval for exports to US buyers[1]. This may suggest China's ever-increasing control over trade in relation to the US.
- Negotiation Tactics: China maintains a willingness to negotiate but insists that the US must abandon its unilateral tariff measures[1]. This approach demonstrates China's pressure tactics on the US to de-escalate the trade war.
- Perception of Power: China perceives itself as having an upper hand in the standoff, partly due to the US's vulnerability to economic pressure, such as the risk of recession and inflation[1].
[1] "China's Rising Stakes in the Trade Dispute," Reuters, June 6, 2020. Accessed on January 27, 2021. https://www.reuters.com/article/us-usa-trade-china-list/chinas-rising-stakes-in-the-trade-dispute-idUSKBN23E0DY
- Despite ongoing trade conflicts, China's Communist Party, led by Party Chief Xi Jinping, is working to strengthen the economy and society against potential intensified shocks from the ongoing trade war with the USA.
- In an attempt to ensure a sustainable recovery, the Chinese government is focusing on improving economic tools, considering the adoption of a flexible monetary policy, and lowering interest rates when necessary.
- The efforts are aimed at boosting domestic consumption, particularly among lower and middle-income groups, to drive economic growth, with companies affected by tariffs also receiving additional support.
- While signs of loosening tensions may be present in the tech dispute between the two, China has implemented export restrictions on crucial raw materials, potentially impacting US industries, suggesting that China's readiness for an intensified trade war with the USA remains strong.
