Xi Jinping urged to respond cautiously to Joe Biden’s trade tariffs

Chinese trade experts urge Xi Jinping to be cautious as he plots the best response to Joe Biden’s tariffs on $18 billion of Chinese imports, knowing a fight for the tooth could hurt the slowing economy and escalate tensions during a politically charged American election campaign.

The US president on Tuesday sharply raised tariffs on Chinese products including electric vehicles and solar cells in a pre-election bid to protect American jobs.

China’s dominance of clean technology supply chains means Beijing has the potential to retaliate, hindering access to resources, materials and technologies critical to the U.S. economy.

But former officials and government advisers in Beijing warned of worsening tensions with Washington just as Biden and his rival Donald Trump clash over who can be tougher on trade with China six months after U.S. polls.

They are also wary that Washington could pressure Europe to follow suit and crack down on Chinese cleantech exports. Brussels is conducting its own research into China’s EV, solar and wind industries.

“China has the moral high ground,” said Henry Huiyao Wang, a former senior government official and founder and president of the Beijing-based Center for China and Globalization. “We would like to see China ‘go high’ instead of ‘go low’ with the US.”

Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges, another government-affiliated think tank, said China should be “very cautious” about imposing additional tariffs.

Zhang noted that Beijing’s previous retaliations – which were proportional to US moves in dollar terms – had been “ineffective” in slowing the trade war, while the impact of the latest tariffs on the real economy was “not substantial” .

“The last time the two sides – with the US waging a trade war and imposing tariffs, and China retaliating – actually hurt the US, China and the world,” said Zhang. “However, I think perhaps the most important work is to morally criticize them and then urge the world not to follow this path.”

Biden’s latest move quadruples the tariff on Chinese electric vehicles to 100 percent, doubles the tariff on solar cells to 50 percent and triples the tariff on Chinese lithium-ion EV batteries to 25 percent.

Western experts said there would still be broad domestic expectations that Xi, China’s most powerful leader since Mao Zedong, would hit back.

Beijing will look for a “sore point” to show it will stand up to the US without undermining its own economic interests, said Benjamin Kostrzewa, a former trade official in Barack Obama’s administration and now a lawyer at Hogan Lovells who advises on the US and China. trade.

“China has its own domestic political considerations,” he said. “They will want to be seen as opposing what they see as American antagonism. Countermeasures to measures are China’s usual response in these situations, and they will not try to escalate, but they will undoubtedly take some kind of measures.”

In addition to the latest tariffs, the US has restricted sales of critical technology exports including high-end computer chips, imposed sanctions on hundreds of Chinese companies and is forcing the sale or ban of Chinese app TikTok, among other things.

Trivium, a Beijing-based consultancy, has been researching dozens of crucial minerals seen as vulnerable candidates for Chinese retaliation. It said the most likely is tungsten, which is used in military applications, as well as in the automotive and aerospace industries; rare earth elements used in magnets, computer chips, batteries and lasers; and vanadium, which also has broad military, industrial and nuclear energy applications.

Analysts at think tank Rhodium said that in addition to export controls on critical raw materials and technology, Beijing could also retaliate through currency devaluation, disruption of mergers and acquisitions or denying some multinationals access to the Chinese market .

Simon Evenett, a professor of international trade at the University of St. Gallen in Switzerland, said China could surgically target exports from seven battleground states in the upcoming U.S. presidential election.

“This is not a recommendation, but it does raise the question: how many jobs are at stake if China were to ban exports from these states? And how big are those job losses compared to Joe Biden’s election margin in the 2020 presidential election?” he added.

During high-level meetings with their Chinese counterparts over the past year, U.S. officials have emphasized that Washington will not hold back from taking national security and economic measures even as the two countries try to stabilize relations.

Biden said on Tuesday that China had engaged in “cheating” by employing unfair trade practices. But the new tariffs follow other recent moves to protect American manufacturing and blue-collar jobs.

Cui Fan, a government trade adviser, said that while it was clear that the US election was “a major factor” in the tariffs, Beijing also had to consider the impact of increasing US trade restrictions on the Chinese economy.

“The gradual competitive pressure in the industrial chain. . . deserves our attention because of its medium to long-term impacts on China’s entire new energy industry,” he said.

Wang said the tariffs were “counterproductive” to global climate change ambitions. “This really goes against what the US has been preaching for decades.”

According to the World Bank, the US-China trade war has affected about $450 billion in annual trade, and experts from the organization and the IMF, among others, have warned of significant pain for the global economy, as well as the US and Chinese economies. consumers and employees.

Hua Chunying, a spokesperson for the Ministry of Foreign Affairs, said of X, which is banned in China, that “US protectionism will ultimately harm itself.”

She also posted a screenshot of Biden’s earlier language bashing Trump’s tariffs as taxes borne by “the American people,” with the caption “lesson on 2019 tariffs.”

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