China’s export-focused economy has much more to lose right now from a protracted fight than does the U. S.
The long-predicted trade war with China is here. China just responded to President Donald Trump ‘s tariffs on steel and aluminum by slapping tariffs on U. S. food and steel pipes, setting off a sharp drop in U. S. stocks. With the White House promising additional trade barriers on up to $60 billion in Chinese imports, more tit-for-tat trade retaliation seems likely.
But many economists and trade experts believe that, while the U. S. president could win the current battle, he will ultimately lose a trade war and a big reason for that should concern the U. S. tech sector.
China’s export-focused economy has much more to lose right now from a protracted fight than does the U. S.
«China has far more exposure to the U. S. regarding exports,» says Christopher Thornberg at Beacon Economics in Los Angeles. Its state-owned enterprises depend on exports to the U. S. to keep paying off their significant loans. Exports overall account for about 20 percent of China’s GDP, with a quarter of that going to the U. S. By contrast, only 11 percent of U. S. GDP is export-based, of which 10 percent goes to China.
As the tariffs were announced on Monday, Chinese President Xi wasn’t talking about winning trade wars. Instead, he gave a speech on «three tough battles» China must win: reducing poverty, tackling pollution and preventing financial risks.
China could blink first and offer concessions in the form of more open markets and better protection of U. S. intellectual property, but any celebration by U. S. companies would be short-lived. China’s dependence on the U. S. has declined significantly since the 1990s, and the trend is set to continue. This dispute will only accelerate China’s ambitions to become an independent producer and exporter of the three products that top the list of U. S. imports to China: smartphones, aircraft and semiconductors.
In cell phones, China is already close to achieving its goal. Case in point is Huawei, the electronics company that the U. S. government has effectively banned from the U. S. due to concerns over ties between the company and the Chinese military.
