China Strikes Back Against US Tariffs, But Leaves Room for Negotiations

This has been lightly edited for clarity. 

China right now is going to lay low. They have retaliated to the tariffs formally in that they have said that after a period of several weeks, they may put tariffs on American coal and LNG and truck parts, and some agricultural commodities, but it's actually just a holding pattern. China is still hoping that it can get some kind of preemptive deal such that not only will these 10% tariffs get walked back, but previous tariffs from the first trade war might get walked back.

China would very much like to stabilize the relationship and sees what it sees as Americans unrelenting attacks on China. And so it is going to keep its powder dry until it has explored the possibilities for doing that. China has not yet put these tariffs into effect. This is a shot across the bow, to let the Trump administration know that China is far better prepared for a tit for tat trade war now than it was in 2018.

It has strengths in its economy that it didn't have then. It has become the global leader in electric vehicles, in wind, in solar, medical precursors, critical minerals. And it is prepared to defend itself on all of those fronts. It has listed several additional critical minerals that it might put export bans on, that it might deny to the United States if an agreement can't be reached because China exports more to the United States than it imports from the United States.

China is more vulnerable than the United States is. If we are going to have a tit for tat escalating trade war. China will run out of things, to tariff coming in from the United States, but it also has other weapons at its disposal. It can deny us medical precursors. It can deny us, rare earths. It can deny us legacy level chips of the sort that go into our washing machines and into our cars.

China has also been doing what it can to sanctions proof its economy and to develop new markets, especially in the global South, such that if it can't, you know, sell to the United States or to Europe, it will sell there. China still has more to lose from a trade war than the United States does. But China is not going to do anything that would be seen by the Chinese people or by the world as going cap in hand to the United States, asking for it to lay off.

It sees itself as a pure competitor, as a superpower, and it is willing to get involved in a competition from which nation can absorb more privation. China or the United States. They're pretty confident they win. If it comes down to privation and who can put up with more? That said, they very much want to avoid this. It's a bad time for China.

Its economy is weak. It does not want a trade war. But it will also not simply give in to a new, you know, Trump administration.