As US president-elect Donald Trump steps up his tariff threats against China, Beijing is moving to beat the next US president to the punch with its own restrictions and get Washington to the negotiating table ahead of a full-blown trade war, analysts said.
Armed with the lessons of the last trade war during Trump’s first term, China is seeking to amass bargaining chips to kick off talks with a new US administration on contentious aspects of bilateral ties, including trade and investment, and science and technology. It is also concerned about the harmful effects of additional tariffs on its already-fragile economy.
Last week, China launched a probe into US chip giant Nvidia Corp over what it claimed were suspected antitrust violations, which follows its ban on US-bound exports of rare minerals.
Illustration: Yusha
“We have to look at this as the opening bid in what will likely ultimately turn into a negotiation with the US rather than just an imposition of tariffs and everyone walks away,” HSBC chief Asia economist Fred Neumann said.
China is better prepared to deal with almost any tariffs, short of an “Armageddon announcement” of a 60 percent tariff on all Chinese goods, said George Magnus, research associate at the University of Oxford’s China Centre.
The world’s second-largest economy now globally dominates sectors such as electric vehicles and green energy, and has less need for the Boeing jets and large gasoline-fueled cars it bought back in 2017, having found substitutes such as Airbus airplanes and its own Comac C919.
Nonetheless, China is far from self-sufficient.
A new trade war with the world’s biggest economy would still hurt China more, analysts said, as Washington can levy ever-larger import duties on its goods and further rip China from its supply chains.
China still needs to import strategic materials from the US, such as advanced microchips and other high-tech equipment, and counts on US consumers to buy its goods, given an increasingly pessimistic global trade outlook and weak domestic consumer demand.
Beijing wants to sit down with Trump before he places more curbs on US high-tech exports and to secure the renewal of the US-China Science and Technology Agreement, said Alicia Garcia-Herrero, chief economist for the Asia Pacific at Natixis.
The agreement, which enables scientific collaboration between the two countries, lapsed in August and negotiations over its renewal are unlikely to be completed before Trump’s Jan. 20 inauguration.
While China’s Huawei has heavily invested in advanced chipmaking capabilities, their commercial viability remains unclear, she said, incentivizing China’s negotiators to sit down with their US counterparts to strike a deal ensuring a steady supply of US-made chips.
Beijing took two years before it agreed to buy an extra US$200 billion in US goods and services, per the terms of the “Phase One” agreement which ended the first trade war.
This time, China has new carrots to dangle, such as increasing purchases of oil and liquefied natural gas, as the US is currently pumping out more than it can consume.
“Trump bragged on the campaign trail: ‘Drill baby, drill,’ so [he] will need the demand support,” said Bo Zhengyuan, a Shanghai-based partner at consultancy Plenum.
Given the increasing restrictions on the export of chips, agricultural goods, commodities and energy are among the items the US can still sell to China, Bo said.
When asked for comment, the Chinese Ministry of Commerce said it was open to engaging and communicating with the economic and trade teams of the Trump administration.
However, Beijing also has sticks to beat Washington with, if the US side feels China’s failure to meet its previous purchase commitments means it would gain more from tariffs than talks.
US firms are already feeling the squeeze, American Chamber of Commerce in China president Michael Hart said.
“US companies and other foreign companies have really been concerned about whether they actually have access to this market,” Hart said. “Can we even sell into China anymore? Is there an outright ban on us?”
Business sentiment among US firms in China is at its lowest since 1999, a September survey by the American Chamber’s Shanghai chapter showed.
There are also non-economic factors at play. Trump has pledged additional tariffs of 10 percent on Chinese goods to push Beijing to do more to stop fentanyl flows into the US.
“Using political justifications for the imposition of trade restrictions ultimately makes the tensions much more intractable,” Neumann said.
The fentanyl tariffs also mirror China’s import curbs on trading partners that displease Beijing over issues such as human rights, Taiwan and the South China Sea.
“It’s taking a leaf out of China’s manual of coercion,” Magnus said. “I think they would see it as a slap in the face.”
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,