China has prepared powerful countermeasures to retaliate against U.S. companies if President-elect Donald Trump reignites a simmering trade war between the world's two largest economies, according to Beijing advisers and international risk analysts.
Chinese leader Xi Jinping's government was caught off guard by Trump's 2016 election victory and the subsequent imposition of higher tariffs, tighter investment controls and sanctions on Chinese companies.
But as China's fragile economic outlook has made it more vulnerable to U.S. pressure, Beijing has introduced sweeping new laws over the past eight years that allow it to blacklist foreign companies, impose its own sanctions and cutting off U.S. access to crucial supply chains.
This is a two-way process. China will of course try to engage with President Trump in any way and negotiate, said Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University. But if, as happened in 2018, nothing can be achieved through negotiations and we have to fight, we will resolutely defend China's rights and interests.
President Joe Biden has maintained most of his predecessors' measures against China, but Trump has already signaled an even tougher stance by appointing China hawks to senior positions.
China now has an anti-foreign sanctions law that allows it to counter moves by other countries and an unreliable entity list for foreign companies it says have harmed its interests national. An expanded export control law means Beijing can also weaponize its global dominance over the supply of dozens of resources such as rare earths and lithium, essential to modern technologies.
Andrew Gilholm, head of China analysis at consultancy Control Risks, said many underestimated the damage Beijing could inflict on U.S. interests.
Gilholm highlighted the warning shots fired in recent months. These include sanctions imposed on Skydio, the largest American drone manufacturer and supplier to the Ukrainian army, which prohibit Chinese groups from supplying the company with critical components.
Beijing has also threatened to include PVH, whose brands include Calvin Klein and Tommy Hilfiger, on its list of untrustworthy products, a move that could cut off the clothing company's access to the huge Chinese market.
That's just the tip of the iceberg, Gilholm said, adding: “I keep telling our clients: You think you've priced in geopolitical risk and the U.S.-China trade war, but this is not the case, because China has not yet seriously retaliated.
China is also working to make its technology and resource supply chains more resilient to disruptions caused by U.S. sanctions, while expanding trade with countries less aligned with Washington.
From Beijing's perspective, although relations with the United States were more stable towards the end of Biden's presidency, the outgoing administration's policies largely continued in the same vein as those of Biden's first term. Trump.
Everyone already expected the worst, so there will be no surprises. Everyone is ready, said Wang Chong, a foreign policy expert at Zhejiang International Studies University.
Yet China cannot lightly dismiss Trump's campaign threat to impose across-the-board tariffs of more than 60 percent on all Chinese imports, given slowing economic growth, low consumer confidence consumers and businesses and historically high youth unemployment.
Gong Jiong, a professor at Beijing University of International Business and Economics, said that if there are negotiations, he expects China to be open to more direct investment in U.S. manufacturing or to move more production to countries deemed acceptable by Washington.
China is struggling to revive its economy due to doubts about its ability to meet its official growth target of around 5% for this year, one of its lowest targets in decades.
A former U.S. trade official, who asked to remain anonymous because of his involvement in active U.S.-China disputes, said Beijing used the arrows in its quiver surgically, wary of further erode weak international investment sentiment.
This constraint is still there and internal tensions in China still exist, but if there are 60% tariffs or real hawkish intent on the part of the Trump administration, then that could change, said the former manager.
Joe Mazur, a U.S.-China trade analyst at Trivium, a Beijing consultancy, said Trump's broader protectionist streak could work in China's favor. The president-elect has pledged to impose tariffs of at least 10 percent on all imports to the United States.
If other major economies began to view the United States as an unreliable trading partner, they might seek to deepen trade relations with China in search of more favorable export markets, Mazur said.
However, others say Beijing's planned countermeasures may only harm Chinese businesses and its own economy in the long term.
James Zimmerman, a partner at the Loeb & Loeb law firm in Beijing, said the Chinese government may be completely unprepared for a second Trump term, including all the chaos and lack of diplomacy that would accompany it.
Zimmerman said a key reason trade tensions could resurface was Beijing's failure to meet obligations agreed to in a 2020 deal with the first Trump administration that called for substantial Chinese purchases of U.S. goods.
The smart move by Beijing would be to do everything in its power to prevent the imposition of new tariffs, Zimmerman said.
The likelihood of a broader trade war during the US president-elect's second term is high, he added.
Additional reporting by Haohsiang Ko in Hong Kong and Wenjie Ding in Beijing
