Welcome to the 237th edition of Trade War.
As Trump threatens Trade War 2.0 with Beijing, China is prepared to fight back. High tariffs on Chinese goods will hurt the US economy, says Chinese commerce official. And American companies front-load China purchases.
The Biden administration will expand export restrictions on Chinese chip companies. As US tightens technology controls, China is strengthening state support for its semiconductor industry. And China’s Xi Jinping and Brazil’s President Luiz Inacio Lula da Silva vow to “establish synergies” between their two countries’ development strategies.
Temu parent PDD’s misses revenues and earnings estimates, on continued weakness in China’s economy. And Xi uses COP29 as latest venue to present China as a responsible global leader, in contrast to expected isolationism of a second Trump administration.
Notable/In depth ~
Is a US ban on Chinese drones a smart move for national security or an own goal inflicted on American consumers?
Mexico is flooded with Chinese vehicles raising worries in US and Canada
“The United States cannot compete with China while threatening tariffs that target the very partners it needs to thwart Beijing,” writes University of Sydney’s Michael Green
Trump China appointee watch:
“Very good to learn that President Trump has chosen Alex Wong, as [deputy national security advisor], serving under Mike Waltz,” writes Rush Doshi who previously worked in Biden’s National Security Council.
“This suggests we’ll have a strong and surprisingly Asia-focused leadership team at the NSC that takes the China challenge seriously,” says Doshi, who is also author of “The Long Game: China’s Grand Strategy to Displace American Order.”
Matt Pottinger was the deputy national security advisor in the last Trump administration.
China much readier for Trump trade war 2.0
As President-elect Trump threatens trade war 2.0 with Beijing, China looks better prepared to fight back than last time around—this despite the real weaknesses in the Chinese economy, including an ailing property sector, swelling local debt, and a crisis in confidence amongst households and companies.
“China has been preparing for this day for quite some time. The U.S. is much less important to its trade network (than it was before),” says Dexter Roberts, author of the Trade War newsletter and a senior fellow at the Atlantic Council, in an interview with CNN’s Juliana Liu.
According to San Francisco-based Matthews Asia, about 30 percent of China’s exports last year went to Group of Seven (G7) wealthy countries last year, down from 48 percent in 2000, with significant growth in shipments to the Global South. That’s why China accounts for 14 percent of world exports, up from 13 percent before the first trade war.
Beijing’s successes in trade diversification is one example of how China has readied its economy for another trade war while China is also likely to use retaliatory measures against American companies, if Trump imposes high tariffs on Chinese goods next year.
“They’re already squeezing foreign companies operating in China, and they could turn up the heat on American firms, selecting targets they want to push out of the China market anyway,” says Liza Tobin, senior director for economy at the Special Competitive Studies Project.
“The best response to the tariffs that Beijing can make is to get its own house in order, by restoring confidence among Chinese entrepreneurs, who account for 90 percent of urban employment and most innovation,” says Matthews Asia China strategist Andy Rothman. “This would boost consumer confidence, which would lead to stronger domestic consumption, which would mitigate the impact of weaker exports to the U.S.”
Tariffs will hurt US more, says Chinese official
Beijing is ready to face down high tariffs on Chinese goods which will hurt the U.S. economy more than China’s, says a senior Chinese commerce official.
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