China Says It Will Win Trump Trade War

05-Jan-2017 Intellasia | Forbes | 6:00 AM Print This Post

China will beat the US in a trade war if president-elect Donald Trump wants one.

The country’s government newspaper, the People’s Daily, reported on Tuesday that unnamed trade officials and economic advisers said the Chinese economy could withstand trade tariffs mainly because exports were no longer a driving factor for growth.

Trump has said he would slap tariffs as high as 35 percent on certain Chinese goods. China is a member of the World Trade Organisation and would likely retaliate against unfair trade practices by the new US government. What is unclear is whether the US under Trump would adhere to WTO rulings on trade disputes.

Although it was not mentioned in the report, another way China could impact trade would be to allow the renmimbi to free-float. The currency is controlled by the government and not allowed to depreciate by more than around 4 percent. But that could change. If the US slapped punitive trade tariffs on products deemed important to China’s massive working-class labour market, China could weaken the currency and make it impossible for US competitors to compete on price outside of the US

On December 29, the People’s Daily surveyed over 1,500 people throughout China regarding the possibility of worsening relations under Trump. According to the poll, 79.8 percent said the US was China’s most important relationship. In second place was Russia, with only 37.2 percent saying the same thing.

China is clearly anxious about Trump.

The government media firm also published an op-ed on December 30 that hinted to the possibilities for stronger investment ties between the two countries.

“Rather than bash China, perhaps America should learn from and work with China,” read the op-ed by writer Curtis Stone. “Trump wants to spend $1 trillion on infrastructure upgrades in America to rebuild the nation and put people back to work. The problem is how to pay for it and how to do it. China knows how to fund and carry out serious infrastructure building, and deep-pocketed Chinese investors want to invest billions in America.”

One way for Trump to make that happen is to count on Chinese foreign capital, which in the best case scenario is used in addition to or instead of government infrastructure loans.

China has only recently become a foreign direct investor in the US It owns a number of US companies today, including AMC Theaters, a nationwide chain of movie theaters.


Category: China

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