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China reveals its playbook for dealing with impending Trump trade war
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12/10/2024, 09:38:01




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China reveals its playbook for dealing with impending Trump trade war

Beijing is responding to Biden administration actions decisively and swiftly — a warning to Donald Trump that it will play hardball this time, analysts say.

December 10, 2024

By Katrina Northrop and Vic Chiang


Donald Trump hasn’t yet returned to the White House, and his threatened tariffs on Chinese goods haven’t yet been imposed, but Beijing is already revealing its playbook for dealing with the next administration — and it’s one that will involve aggressive retaliation.

So far in December — in response to Biden administration actions — Beijing has launched an antitrust investigation into Nvidia, slapped stringent controls on exports of critical minerals, told companies to avoid buying American computer chips, and imposed sanctions on 13 American defense firms.

That suggests Beijing isn’t afraid to spook foreign businesses and weaponize its dominance in many high-tech supply chains, experts say, even as it grapples with a weakening economy.

“This begins to form a pattern where China is not just verbally protesting actions by the U.S., but is now kind of proactively retaliating,” said Joe Mazur, a Beijing-based analyst for Trivium China, a research firm.

It’s a “clear indication to, especially, the incoming Trump administration” that China will no longer just absorb whatever “economic suppression” the United States is dishing out, Mazur said.

Last week, the Biden administration tightened rules on advanced chip exports to China, expanding its list of technologies that U.S. companies cannot sell to Chinese counterparts.

Although analysts said the rules packed less punch than they could have, Beijing has reacted furiously — and swiftly.

“China’s message is very clear,” said Wang Yiwei, an international affairs expert at Beijing’s Renmin University. If Trump launches a new trade war, he said, China will target American supply chains. “Any trade war cost will be taken by both markets,” Wang added.

As Trump promises to implement 10 percent tariffs on Chinese goods, Beijing is more prepared than it was during his first administration, analysts say, having spent the past several years developing new tools to push back against Washington.

Beijing’s latest move came on Monday night, when Chinese regulators announced an anti-monopoly investigation into Nvidia, the U.S. artificial intelligence chip juggernaut. It relates to Nvidia’s 2019 acquisition of computer networking company Mellanox Technologies, according to China’s State Administration for Market Regulation. Chinese regulators approved the deal in 2020.

Nvidia said the company works hard “to provide the best products we can in every region and honor our commitments everywhere we do business.”


Beijing has also taken a swipe at U.S. electronics supply chains and defense companies. It banned more than a dozen U.S. defense firms and executives last week from doing business with or traveling to China over the latest package of arms sales to Taiwan, worth $385 million.

Also last week, China’s Ministry of Commerce announced it would ban exports to the U.S. of gallium, germanium, antimony and superhard materials — critical minerals used to produce items like semiconductors, fiber optic cables and night vision goggles — citing their military applications.

The China Nonferrous Metals Industry Association, which represents critical mineral producers, criticized the Biden administration for its semiconductor controls and accused Washington of using “national security as an excuse to provoke trade frictions.”

China’s efforts to control the sale of these minerals represent a “profound acceleration,” said Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies in Washington. “It’s a significant flex that the U.S. doesn’t have much room to counter,” she added, because of China’s dominance over the global critical mineral supply.

But the controls still leave Beijing room for escalation if Trump implements his promised tariffs, Baskaran said. Beijing could add other critical minerals to its banned export list in the coming months.

The Trump administration, she said, should act accordingly. “We need to be judicious, we need to be intentional, and we need to be very targeted at building these capabilities knowing that China is willing to flex its muscle on immediate notice,” Baskaran said.

Nvidia is only the latest in a string of U.S. companies caught in the U.S.-China crossfire: Beijing disrupted the battery supply of Skydio, a U.S. drone maker, in October by barring Chinese firms from supplying the company parts for selling drones to Taiwan.

PVH Corp., the American fashion company that owns the Tommy Hilfiger and Calvin Klein labels, faces a probe in China for allegedly boycotting cotton from Xinjiang, the northwestern region where Beijing is accused of perpetrating human rights abuses and engaging in forced labor.

China also imposed visa restrictions Tuesday on U.S. officials involved in Hong Kong-related sanctions, according to Mao Ning, a Foreign Ministry spokeswoman, although she did not name who was on the list. They were targeted under the 2021 “anti-foreign sanctions law,” aimed at stopping Chinese firms and individuals from complying with foreign sanctions.

Foreign businesses operating in China, especially American ones, are anxiously watching these moves. The apparently politically motivated scrutiny of their operations, combined with China’s slumping economy, has soured sentiment.

The American Chamber of Commerce in Shanghai said in a September report that U.S. companies operating in China saw record-low profits in 2023, and less than half of its survey respondents felt optimistic about the five-year business outlook there.

At the same time, international firms are facing increasingly stiff domestic competition in China. A stark illustration emerged last week, when General Motors, the U.S. car giant, announced it would take a $5 billion hit as Chinese carmakers have surged in popularity in the country.


These challenges are not coming at a good time for the Chinese economy.

Growth is unlikely to hit the government’s 5 percent target this year, leading Beijing to unveil several stimulus measures to boost demand. Further measures are expected, perhaps as soon as this week.

Shen Dingli, a Shanghai-based international relations scholar, expressed concern that the escalating retaliatory measures between Beijing and Washington would further burden China’s economy.

“These measures not only can hurt your, opponent but also inflict harm to yourself. And the U.S., after all, has a bit more bullets than we do.” Shen said.

“From an economic perspective, exercising greater restraint could reduce damage, slow down the confrontation, and create more time for both sides to engage in negotiations,” he said.

When Chinese leader Xi Jinping met with international economic leaders on Tuesday in Beijing, he seemed intent on portraying China as open for business, while also reserving his country’s right to protect its economic interests.

“Tariff wars, trade wars and technology wars are against historical trends and economic principles, and there are no winners,” Xi said, according to state media.


https://www.washingtonpost.com/world/2024/12/10/china-trump-trade-war-tariffs/






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