The News
While China has indicated it’s done hiking tariffs on US imports, at least for now, Beijing’s trade war strategy is evolving: In recent days, China has wielded non-tariff weapons to put pressure on the US economy — and American companies specifically.
China has sent back Boeing jets, restricted Hollywood imports, and suspended exports of a range of critical minerals used in manufacturing. That willingness signals how prepared Beijing feels to not only weather this storm, but also prevail in its influence over global trade, analysts argued.
And there are more tools in Beijing’s toolbox, should leader Xi Jinping choose to ratchet up the fight.
SIGNALS
Beijing’s strategy showcases a new form of retaliation
The case of Boeing — the company’s jets are being returned to the US after China reportedly told its airlines to halt deliveries — reflects how American manufacturing can become Beijing’s pawn. America’s aviation industry is in limbo, “with some airline CEOs saying they would defer delivery of planes rather than pay duties,” Reuters reported. China’s critical minerals curbs, meanwhile, could hurt US automakers and medical tech manufacturers; production could halt within months if stockpiles run out, the Financial Times reported. “It’s a form of retaliation where the Chinese government can say ‘OK, we’re not going to go tit-for-tat any more on the tariff rate but… we will incentivise companies to plead with your own home governments to change tariff policy,’” one senior auto executive said.
Trump ‘brought a tariff to a gunfight’
After being caught off-guard by US President Donald Trump’s trade war in 2018, Beijing has shown more preparedness this time, hitting Washington where it hurts and indicating a greater tolerance for pain, several analysts argued. Trump could become “desperate to end the trade conflict,” The New York Times’ Nicholas Kristof wrote, arguing that given Beijing’s use of non-tariff, targeted measures against the US, Trump is “taking a tariff to a gunfight.” China can still inflict more damage on US firms, by restricting high-profile companies like Tesla from doing business, for example: Given Beijing’s capacity for escalation, it seems increasingly likely that “Trump will eventually be forced to back down,” The Atlantic wrote.
Chinese firms pivot to weather trade war storm
While targeting US firms, Beijing is also moving to insulate its beleaguered domestic economy. Acting under government influence, several Chinese e-commerce giants including Alibaba and JD.com have launched a national campaign to help the country’s exporters switch to domestic sales. Part of the motivation is in nationalism: “A sense of anti-US unity has prompted each Chinese company to do whatever it is capable of,” a Beijing-based e-commerce consultant told the Financial Times. But it also fits with Beijing’s broader effort to boost consumption and demand at home after years of sluggish growth, and the firms’ pivot “aligns with this ambition,” China economic newsletter Peking Ensight noted. Still, some firms that cater to foreign customers could struggle to serve a domestic consumer base that remains wary of spending money.