By Mary Childs
Sept. 10, 2018 11:11 a.m. ET

BEIJING — China will not hesitate to retaliate in the escalating trade war with President Donald Trump and the U.S., even if it means hurting itself, a Beijing-backed think tank says.

The policy moves by Trump’s administration have been “both unimaginable and unreasonable” and “have gone beyond trade friction” to become a trade war designed to hurt Chinese technology and manufacturing industries, Chen Wenling, the chief economist at the China Center for International Economic Exchange, said on Monday. The think tank is tied to the Chinese government

Because the U.S. has already touched both the bottom line — the economy — and the “red line” of Taiwan, “China has to fight back,” she said through an interpreter. “China will not hesitate to inflict pain on the U.S.”

Trump has repeatedly attacked China for what he says are unfair trade practices. The U.S. has already imposed billions of dollars in tariffs on goods imported from China, and on Friday Trump threatened to add another $267 billion to the list.

China will match what the U.S. does, because it “always believes in reciprocal acts,” Chen said.

While trade wars always hurt both parties, this one will hurt U.S. consumers, which will then affect the whole U.S. economy, Chen said. Currently the U.S. is on an “adrenaline high” from tax cuts and other policy measures that have helped keep the stock market at or near highs and unemployment very low, Chen said. But “people will wake up from the Trump frenzy,” she said, and realize the cost of these policies. She forecast that this “distorted opinion” would wear off in the latter half of this year as the effects of the trade war filter down to consumers.

The U.S. has also shifted a long-held stance on the sensitive issue of Taiwan, which China sees as a part of China. In March, Trump signed the Taiwan Travel Act, which allowed for official visits between the self-governed island and the U.S., and a few weeks ago, Taiwan’s president visited Houston. China objects to all of this.

China is ready to defend its sovereign integrity through all means, political and military, said Xu Changchun, of the group’s strategic research department. Economically, China and the U.S. are interdependent, so if China were to sever some economic ties, it would hurt itself as well, he said.

“We are like two brothers: when we get along, we can go and make money together,” he said. “When we don’t get along, both are hurt.”

Other countries along the global supply chain will also be hurt, Xu added.

Both Chen and Xu emphasized that they would prefer a good and far-reaching relationship that is mutually beneficial. Xu suggested the current policies won’t last, because Trump can’t change the nature of the global supply chain single-handedly, and eventually the cost to American consumers and the economy will become evident.

Trump and his administration “are a bit irrational” and self-satisfied, Chen said. Citing Trump’s reversal on a jointly announced trade agreement that he quickly superseded with tariffs days later, Chen added: “Trump’s repeated failure to keep to his words is giving the U.S. a very bad global image.”