Since the trade war between the USA and China escalates, the biggest questions are which side has more leverage and which is willing to tolerate more pain.
China exported more than 400 billion US dollars to the United States last year, and American companies sold much more than in China. Therefore, the Trump government claims that it has all the lever.
“The ball is in the Chinese dish. China has to conclude a contract with us. We don’t have to do a deal with you,” said Karoline Leavitt, press spokeswoman for the White House on Tuesday.
“China wants what we have. Every country wants what we have: the American consumer. Or to express it differently, you need our money,” she said reporters in Washington.
But the commercial landscape is more complicated. And experts say China believes that it can cause more damage to both the United States and to tolerate more pain from a tariff war.
“China has a lot of cards. It has a lot of influence,” said Jia Wang, Senior Fellow at the China Institute of the University of Alberta.
The US China trade war is in full swing, whereby no side shows signs of the back. Andrew Chang explains how China is positioned to absorb the shock of the US tariffs and what this global economic disorder could mean for their place in the world order. Pictures of Getty Images, the Canadian press and Reuters.
A change in China’s reaction
Modern US China trading is dominated by technical products and electronics, from iPhones to computers to batteries.
According to Wang, there are enormous exports of crucial industrial inputs that will be very difficult for the United States because China controls a large part of world production. In a retaliation measure, for example, exports of certain critical minerals banned at the beginning of this month.
The ban includes seven rare removal and magnets used in defense, energy and automotive technologies.
“This will really hurt the US industries, and very few countries can really close this gap,” she said. “There is simply not enough time for other suppliers to get on the market quickly and deliver the amount required by the USA. So it is a very powerful card that China can play.”
Wang also pointed out that China is America’s second largest foreign creditor. Hold about 760 billion US dollars in the USA In Treasury Securities from January.
In contrast to the trade war in 2018, when China quickly tried to negotiate a break in tariffs, Beijing follows a more aggressive approach this time.
“If the United States really wants to solve the problem through dialogue and negotiations, it should stop to exercise extreme pressure, not to threaten and blackmail and to speak to China based on equality, respect and mutual benefit,” said Lin Jian, spokesman for the Foreign Ministry, at a briefing.
In the meantime, the Chinese President XI Jinping tours Southeast Asian countries to improve economic ties and increase China as a more reliable partner than the USA
US exports are just a part
Spencer Hakimian, Chief Investment Officer from Tolou Capital Management in New York, says that China has diversified his trading partners for years.
“China’s exports to the USA have been flat in the past 13 years,” he says. But in the same period, he says, his exports to the rest of the world rose by more than 80 percent.
Even during the first Trump Presidency, he said China was rather exposed to American tariffs. Today he says that China’s exports to the USA is 400 billion US dollars for a gross domestic product of 20 trillion dollars in the United States.
“This is two percent of their economy,” he said. “Yes, it hurts, but if you grow an economy with five percent and have a unique loss of two percent, it is not as important as you really think.”
He says China has a long -term strategy and a clear plan for what it would do as soon as American tariffs were imposed.
Compare that, he says, with the chaotic approach from Washington, whose tariff rate in China is changing again and again. When the markets dived last week, Trump unilaterally reduced things with comprehensive exceptions. His top cabinet picks offered completely different reasons for the tariffs, which sometimes even contradict each other. Some said the tariffs were permanent and are said to increase income, while others said they were a leverage for the exact trade concessions.
“I am an American, I support my country, I want the Americans to win this trade war,” said Hakimian, “but I also have to be objective because I am a global asset manager and that is my job. Obviously, the Chinese are more prepared for it.”
A higher pain tolerance
Two well -known China experts published a research paper in the Washington Quarterly last week, in which Beijing’s emerging strategy was listed.
Evan Medeiros and Andrew Polk wrote about what they described China’s “precision -led economic ammunition” that go beyond critical mineral controls. This includes taking the antitrust law examinations into account. After the last US trade war, China introduced a determination of the unreliable entity list, which could make it more difficult for targeted companies to do business in the country.
US President Donald Trump says that China manipulates his currency to get the effects of US tariffs. Andrew Chang explains China’s strictly controlled exchange rate system and why currency manipulation is not so clear. Pictures of Getty Images, the Canadian press and Reuters.
China above all has a higher pain tolerance in a trade war.
According to Wang, the China Communist Party does not have to worry about angered consumers who are upset about the economic effects of a trade war as the American government.
“In view of the entire chaos in the USA, it is still an electoral system. President Trump and his cabinet still have to observe how the surveys will react to the situation,” she said.
Put all of this together, and the Chinese approach to the trade war takes shape. The Chinese leadership believes that it can cause real pain, even if it uses the crisis to strengthen relationships with neighboring countries.
The difficult part of conflicts is to find a way out. The United States seems to have thought that China could force it on the table and precise concessions on its conditions. Just a few weeks after the beginning of this trade war, this is more complicated than many thought.
