“In the event of a trade war with the United States, China’s response would go well beyond tariff increases,” said Mark Williams, Chief Asia Economist for Capital Economics. “U.S. companies would find their products and operations in China subject to tighter regulation that hampered their capacity to do business there.”
“U.S. exports of cars and aircraft would be in the firing line,” he said. China might also subject U.S. companies to tighter regulation that hampers their capacity to do business. Beijing may also encourage its exporters by offering tax rebates to overcome any reduction in export demand in the U.S., Williams said.
In informal discussions, Chinese officials say there is a lot of uncertainty about how the new U.S. president will handle relations with China, and preparations are being made to deal with varied scenarios.
◆ Mixing Politics and Economy
In the past, China has responded with trade restrictions on several countries for political reasons. For example, Norway for awarding the Nobel Peace Prize to a dissident writer or giving a visa to Tibet’s Dalai Lama. Trump’s recent tweet questioning the One-China policy concerning Taiwan has already caused a stir in the Chinese Communist Party.
Talking about investments by China’s companies in the United States, Trump recently said, “They haven’t played by the rules, and I know it is about time they are going to start”. Some members of the U.S. Congress have also called for a review of the policies concerning Chinese investments.
“I am sure that the U.S. under Trump will focus unrelentingly on the exchange rate,” Kerry Brown, Professor of Chinese Studies and Director of the Lau China Institute at King’s College, London. “It is a huge anomaly in the 21st century that the world’s second biggest economy does not have a market set exchange rate … In that sense, China is really a freeloader, in the eyes of its American opponents, and they will want to see a quick move to rebalance the Chinese currency, and do something about this anomaly”.
◆ U.S. Business Concerns
More than 1,500 Chinese companies established operations employing 80,000 workers in the United States, according to the American Chamber of Commerce in China.
U.S. businesses operating in China have their own fears of moves that cause instability to trade and investment relationships.
◆ Penalty Corners
Who suffers most in the case of a trade war? China would be the first to be hit, and more severely because the United States is a major market for Chinese goods. America buys three times more than what it sells to China.
Williams does not see the incoming President slapping the 45 percent tax on Chinese goods as he had promised, but hostilities can break out anytime, he warns.
Full article: China Seen Readying for Trade War During Trump Presidency (The ChosunIlbo)