China could choose to run a dirty campaign against highly visible products like Starbucks coffee and Apple iPhones in retaliation for Trump’s tariffs.
As President Donald Trump ratchets up trade war rhetoric against China this week, trade experts worried that the world’s second-largest economy will unleash a Pandora’s Box of punitive tactics against American companies.
After Trump threatened another $200 billion in tariffs in response to China’s pledge to match an initial $50 billion in trade sanctions, the Chinese Ministry of Commerce promised quantitative and qualitative retaliatory measures in its response on Tuesday.
Some economists remained nonplussed by the escalating tensions, pointing out that while the United States imports more than $500 billion worth of goods from China, the value of our exports is only around $130 billion. This imbalance means that China will run out of ammunition in tit-for-tat tariff responses well before the United States, giving it less leverage.
“It’s true that the base on which they can put on additional tariffs is much narrow than the U. S.,” said Ludovic Subran, global head of macroeconomic research at Allianz and chief economist at Euler Hermes.
But Subran and other international trade experts warn not to count China out too quickly.
“The first thing to observe here is that China is not a country of laws — it’s an authoritarian dictatorship… so from that opening point, China is potentially able to play much, much dirtier than the United States,” said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, who warned that American businesses could take the punishment for Trump’s antagonism.
“He will essentially force the Chinese government to retaliate in other ways — and those other ways can be much more costly to American firms,” he said. “That belief is premised on a fundamentally erroneous assumption about how the modern economy works… and a lack of concern with how engaged American businesses are involved already in China.”
American manufacturers like automakers have made considerable investments into manufacturing facilities in China, and the financial and professional services sectors have a large and profitable presence there.
