With President Donald Trump prepared to impose another round of tariffs on Chinese imports, the country’s Foreign Ministry spokesman said it is willing to “fight to the end.”
“China does not want to fight a trade war, but we are not afraid of fighting a trade war,” Foreign Ministry spokesperson Geng Shuang said on Tuesday. “If the United States only wants to escalate trade frictions, we will resolutely respond and fight to the end.”
But what does “the end” even look like, after almost a year of a mix of tough-talk, diplomatic gestures, and, ultimately, harsh tariffs?
“They see the conflict with the United States as not just being about commercial issues, but the entire relationship — including the stability of the Communist Party’s hold on power,” said Scott Kennedy, senior adviser and Freeman Chair in China Studies at the Center for Strategic and International Studies.
“They are not going to back down on issues that threaten China’s core interests, including the party’s position,” Kennedy told ThinkProgress.
“China appears to believe that it has an inalienable right to control its own domestic economy, and its international economic environment… irrespective of any commitments it has made under the WTO or other international agreements,” said Robert E. Scott, senior economist and director of trade and manufacturing policy research at the Economic Policy Institute.
Scott described Trump’s China trade policies as “deeply confused” and unlikely to convince China to “give up what they perceive to be their right to make unlimited investments in the development of their own economy, including all aspects of the industries identified in their 2025 agenda.”
With no further trade talks planned, hopes are hanging on a meeting between Trump and Chinese President Xi Jinping at the G20 summit in Tokyo at the end of June. When negotiations were progressing, it was anticipated that the two leaders would be signing a deal and celebrating at the summit.
But things fell apart in April, when U.S. negotiators accused China of backtracking on key elements of the agreement (including market access and stopping the forced transfer of technologies). Then came the fresh tariffs, with the United States even going so far as to blacklist a Chinese tech giant, Huawei, over concerns that it could be used by the Chinese government to spy on the U.S.
Xi and Trump might still hold a meeting on the sidelines of the G20, although China won’t confirm that any such meeting will take place. But even if it does, Kennedy is not optimistic that any deal will be reached.
“At most, they could decide to temporarily pause their escalatory activities while they renew negotiations… there’s also a pretty strong chance that unlike at other meetings, Xi Jinping might decide to lay into Trump and U.S. actions and let Trump stew,” he added.
Scott too said there wouldn’t be a deal out of the G20, but then, he added, “never doubt the willingness and ability of Team Trump to settle for some half-baked, short-term solutions,” such as settling for increased soybean exports.
The current trade deficit means that China imports far fewer U.S. items than the U.S. does Chinese, and so Beijing will soon run out of American goods to slap with import duties.
China has raised the possibility of limiting the export of its rare-earth minerals (used in several high-stakes sectors, from electronics to oil refineries), but that move also has a limited shelf-life, as it would ultimately hurt the Chinese economy.
Other measures — such as circumventing tariffs by, say, mislabeling Chinese-made goods with a “Made in Vietnam” label, as Vietnam has accused Chinese firms of doing — are also short-term measures.
But Xi has public support in “his tougher stance against the United States,” said Elizabeth Chien–Hale, an attorney specializing in international intellectual property protection.
“I don’t think he’s going to score a lot of points by being totally compliant — it’s not going to look good domestically,” she said.
Meanwhile, the U.S. economy is beginning to see the effects from the escalating tariffs and the economic uncertainty sowed by them. Already reeling from record rainfall, farmers have been unable to sell their grains, having to store them in containers or in some cases allowing them to rot.
American manufacturers are also feeling the pain. According to the Labor Department’s latest jobs report, the U.S. economy added 224,000 jobs in April. The following month, that number dropped to 75,000.
Kennedy cautioned that this trade war can “go on a lot longer.”
China, he said, is concerned with the growth of its GDP and has “a lot of levers” to do so in the short and medium term, including subsidies, increase of purchase by state-owned enterprises, and lowering mortgage interest rates.
Trump, however, “is all out of economic levers,” said Kennedy. The tax cut is already done, and the interest rates are unlikely to go down.
Scott cautioned that not only will things not get better any time soon, but, the beating the American economy is about to take won’t fix the trade deficit with China.
“China has lowered the value of its currency by roughly 10% to date — since March 2018 when tariffs were first imposed — largely offsetting the impacts of U.S. tariffs on overall trade flows,” said Scott. “China has implemented retaliatory trade restrictions that have further reduced U.S. exports to China. As a result, the U.S. trade deficit with China rose faster in 2018 than overall, with the world as a whole.”
Also, he points to the fact that Trump “has done nothing to address the fundamental gap between the interests of U.S. workers and mainstreet [or domestic] firms, and that of multinationals.” Pursuing the protection of American multinational corporations working within China, which will “simply encourage more offshoring of production.”
China isn’t Mexico
Last month, Trump threatened Mexico with a 5% tariff on all Mexican imports, set to take effect on June 10 and gradually increasing to 25% by October, over what he said was the country’s lack of cooperation in stemming the arrival of Central American migrants to the U.S. border.
After concerted negotiations, Mexico agreed to send National Guard troops it does not yet have to its southern border to help with the effort. But the details of the deal the president was celebrating on Friday had, in fact, been agreed upon in March, predating his tariff threat by as much as two months. In other words, the agreement was not a result of his threats, nor were his threats necessary to the agreement.
On Monday, he claimed that a secret second deal had been reached — one that Mexican officials seem to know nothing about.
Experts also say tariffs won’t work the same way on China as they did with Mexico, with any kind of solution — real, or imagined.
“I think with China, the U.S. is pushing for structural changes, using tariffs and trade as a way to force domestic structural changes, ones that may be fundamental to socialism,” said Chien–Hale.
“This is why I don’t think China is willing to give in too much,” she added.
Even though Trump is using the same tool — tariffs — expecting the same kind of response might point to a miscalculation on the president’s behalf.
“He so far has not gotten the Chinese to say ‘uncle’ because the demands are much broader,” said Kennedy, adding that China’s “lack of trust in the Trump administration has stopped them. He hasn’t any success with the Chinese yet.”