Trade relations between the United States and China are witnessing increasing tension ahead of Donald Trump officially taking office next Monday, as the two countries began to take countermeasures in the last days of Joe Biden’s term, paving the way for a trade war between the two parties, represented by the imposition of more US customs duties on China. .
Escalatory measures by both parties
Before leaving office, the Biden administration imposed new restrictions on China’s access to advanced electronic chips, blacklisted more Chinese companies, and announced last Thursday that Chinese government support for the shipbuilding industry gives it an unfair advantage, paving the way for the Trump administration to tighten tariffs. .
On the other hand, the Chinese government responded by adding more than 10 American companies to its blacklist, and imposed new restrictions on the export of vital minerals, in addition to continuing its investigations against PVH Corp, which owns the Calvin Klein brand, accusing the United States of unfair trade practices. Such as flooding the market with low-quality semiconductor chips.
Tu Xinquan, a former advisor to the Chinese Ministry of Commerce, stated, “The Biden administration took a number of measures before leaving, and the Chinese government is not at all satisfied with that,” adding that some of the current Chinese measures bear the nature of retaliation.
Trump’s expected policies
Economists expect that the Trump administration will impose new tariffs, but this will require waiting for confirmation from the main members of his government, taking into account the impact of these measures on markets and inflation. According to a report published by Bloomberg, Trump’s economic team is studying a plan to gradually increase customs duties at a rate of 2% to 5% per month.
At a Senate hearing, Scott Besent, Trump’s nominee for Treasury Secretary, outlined three main goals for the tariffs:
- Correcting unfair business practices.
- Boosting federal government revenues.
- And using it as a negotiation tool to achieve broader strategic goals.
Besant pointed out that “free trade must be balanced with trade justice,” adding that the Chinese economy is facing a historic deflation crisis, and accused Beijing of trying to overcome this by increasing exports instead of fixing its internal economic problems.
Trump had previously threatened to impose tariffs of up to 60%, but it has not been determined whether he will go ahead with this decision or use other legal tools, such as activating the “International Emergency Economic Powers” law, to impose customs duties of up to 10% to prevent the flow of fentanyl. (narcotic substance) from China.
Potential economic repercussions
According to Bloomberg, China is facing increasing economic challenges, as recent data showed that its economy achieved a growth rate of 5% last year, supported by last-minute stimulus measures and a rise in the trade surplus to record levels.
However, new US tariffs, along with possible similar measures from the European Union, may negatively impact the competitiveness of Chinese exports.
The yuan’s exchange rate has also fallen by more than 5% against the dollar since last September, with Trump’s threats to impose new tariffs escalating. Beijing may allow further devaluation of its currency to confront any further escalation.
In addition, major companies from both countries are in the confrontation, with China targeting Texas Instruments and Analog Devices, which manufacture power chips and analog electronics, while companies such as Tencent and Contemporary Amperex Technology face increasing scrutiny after being included in the list of “Chinese military companies.” By the Biden administration.
“With these measures, the goal is clearly to contain China’s growth,” said Zhou Bo, a retired Chinese army colonel and senior fellow at Tsinghua University.
Chinese pacification efforts
Despite the ongoing escalation, Beijing seeks to avoid an all-out confrontation with Trump. Although its dependence on the American market has decreased since the previous trade war, it still relies on exports, especially in sectors such as electric cars and batteries, to boost its faltering economy.
As a gesture of good faith, China announced that it would send Vice President Han Zheng to attend Trump’s inauguration, a position usually represented by ambassadors on such occasions. The Chinese Ministry of Foreign Affairs said in an official statement that it “looks forward to enhancing dialogue with the new administration, and working together towards stable and sustainable development of bilateral relations.”
“Biden handed over the file of relations with China to Trump equipped with some winning cards, and now we have to wait and see how Trump will act regarding the tariffs he threatened to impose,” said Dylan Low, an assistant professor at Nanyang Technological University in Singapore.
