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China’s arsenal in US tariff row shrinks but it has other weapons
BEIJING, Sept 18, 2018 (BSS/AFP) – With Donald Trump now planning to hit
roughly half China’s exports with higher tariffs, Beijing finds itself
outgunned as it imports far less from the United States and cannot fire back
dollar-for-dollar.
Trump said Monday he would impose 10 percent tariffs on $200 billion of
Chinese goods from September 24, adding to levies already put on $50 billion
of products in the summer.
The US imported around $500 billion worth of goods from China last year.
China has imposed retaliatory tariffs on $50 billion of US goods so far and
has threatened to hit another $60 billion but it is running out of targets:
it imported about $130 billion in US goods last year.
Beijing has warned it would respond “quantitatively or qualitatively”,
hinting it has weapons other than tariffs in its arsenal.
Here are its options:
– Tariffs to start –
China has warned it could impose tariffs of five to 25 percent on $60
billion of US goods. Those possibly subjected to five percent taxes range
from peppermint oil to pig hides, while cocoa butter and condoms would face
25 percent levies.
Last month White House economic advisor Larry Kudlow dismissed China’s
threat as “weak” but admitted Beijing could “damage our companies in China”.
– US company sales-
Chinese authorities could find all sorts of ways to make life difficult for
US companies.
Boeing sells a quarter of its planes in China, the second-biggest market in
the world, and the state-run tabloid Global Times has warned Beijing could
“adjust the sales volumes”.
Some experts point to a historical precedent: South Korea’s Lotte — which
infuriated Beijing by providing a golf course to be used for a US missile
defence system — saw scores of its supermarkets shut down, ostensibly over
“safety issues”. It sold many of its China-based outlets this year.
Beijing may be less inclined to hit American stalwarts like McDonald’s,
General Motors, or Ford where state-owned Chinese partners hold significant
stakes.
But targeting Apple, Starbucks or Nike may avoid some of the self-inflicted
pain.
Apple has already come under attack this summer from a state media campaign
investigating its apps and iMessage system.
– Boycotts –
State media has so far refrained from whipping up anti-American sentiment
as it has in diplomatic tiffs with Japan and South Korea.
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But Wu Baiyi, head of the Institute of American Studies at the Chinese
Academy of Social Sciences, warned: “Ordinary Chinese people are actively
following international issues.”
He did not know for how long the public would remain calm, adding: “If 1.3
billion Chinese have their heart broken by Americans, this I’m afraid is a
very hard thing to repair.”
– Exchanges –
“Chinese parents have been willing to send their kids to study in the US,
but if the US keeps on like this, we can send them to the UK, to Germany,
even to Brazil or India,” said Wu.
Some 350,000 Chinese students head to the US each year, a crucial source of
income for some American colleges.
Hundreds of thousands of tourists also make the journey, splurging on Rodeo
Drive and a Las Vegas slot machines.
The spat with the Seoul showed how quickly Beijing could turn off the
tourist tap: China’s hordes of travellers stopped visiting after Beijing
banned group tours.
– Red tape –
Semiconductor giant Qualcomm called off a deal this summer to buy Dutch
rival NXP after Chinese anti-trust authorities delayed approval.
It was widely thought to be a casualty of tensions between Washington and
Beijing, demonstrating the power China’s large market has gained in deciding
the fate of international mergers and acquisitions.
China has also touted this year’s financial opening allowing foreign firms
to take majority stakes in local banks. US lenders could find themselves at
the back of the line for licences and approvals if tensions continue to
spiral, experts say.
American firms are already seeing increased scrutiny — 27 percent have
reported more inspections, 19 percent felt tighter regulations and 23 percent
witnessed slower customs clearance, according to a September survey by the
American Chamber of Commerce in China.
The White House believes China will wave the white flag after the next
round of tariffs, said chamber chairman William Zarit.
“But that scenario risks underestimating China’s capability to continue
meeting fire with fire,” he added.
– Debt and yuan –
Some analysts point out that China is the main holder of US debt, but
selling part of its nearly $1.2 trillion in US treasuries could cause self-
inflicted losses.
Same for the yuan. While a devaluation of the Chinese currency could offset
the effects of the tariffs, analysts say Chinese policymakers would not want
to risk a capital flight from the country.
BSS/AFP/MSY/1403 hrs