Chinese officials were caught off guard by President Trump’s threat of new 10% tariffs on an additional $300 billion worth of Chinese imports.
Announced by Trump via Twitter at 1 a.m. Beijing time Friday, the plan for new tariffs was a surprise to Chinese officials and state media, who had already made statements praising the “candid, constructive, and efficient” trade talks in Shanghai that concluded Wednesday and announced China’s resultant commitments to buy more U.S. agricultural goods.
Officials quickly swung around to condemn Trump’s tariff threat as a sign of American “insincerity,” threatening countermeasures if the tariffs are implemented Sept. 1. But they also left diplomatic space for negotiating teams to mitigate the impact of Trump’s threat in the few weeks before that deadline.
“China will not accept any extreme pressure, intimidation, or blackmail,” Ministry of Foreign Affairs spokeswoman Hua Chunying told reporters Friday.
The promise of new tariffs violates agreements reached between Trump and Xi as a basis to restart trade negotiations at the Group of 20 economic summit in Osaka, Japan, in June, Hua said — namely, that talks would move forward on a basis of “equality and respect” and that the United States would not impose new tariffs.
“Talks in Shanghai had just finished, and the U.S. decided to impose new tariffs. This goes against the Osaka agreement, betrays the correct path, and shows the world that the U.S. is hot and cold, inconsistent and self-contradictory,” Hua said. “The ball is now in the U.S.’ court. The U.S. has to prove its trustworthiness to the world, that it’s a dependable partner for negotiation.”
Chinese experts said that the erratic style of Trump’s tariff announcement is raising doubts in Beijing about whether the U.S. negotiation team can be trusted to make trade decisions.
“This shows that the American negotiation team cannot fully represent Trump’s thinking, or else there wouldn’t be such a big change,” said Song Guoyou, deputy director of the Center for American Studies at Fudan University in Shanghai.
Ministry of Commerce spokesman Gao Feng told reporters Thursday that U.S. and Chinese negotiators would “intensify” trade consultations throughout August.
Song said the Chinese team would keep speaking with the American team in hopes of continuing the progress that the Shanghai talks had achieved before Trump’s tariff announcement.
Trump’s tweet was “just a threat, not a tangible policy,” Song said. “I think the Chinese side will keep trying to negotiate with the American team, unless we determine that Trump is serious and means it.”
China’s Ministry of Commerce had announced Thursday that Chinese firms were beginning to inquire about new purchases of U.S. soybeans, cotton, pork, and sorghum, without specifying amounts.
Trump said on Twitter that he was raising tariffs because China did not follow through on its promise to buy “large quantities” of U.S. agricultural goods or to stop selling fentanyl-related drugs to the United States.
Hu Xijin, editor in chief of the state-owned tabloid Global Times, tweeted that Trump was “influenced by the wrong intelligence” and misjudging China.
“As far as I know, China has recently sped up buying U.S. farm products,” Hu wrote. “Trump is in a rush to reach a deal & is too arrogant.”
Earlier in the week, Trump told reporters that he thought Beijing wanted to stall trade talks through 2020 in hopes that he would be voted out of office and be replaced with a more amenable Democratic president.
Some Chinese analysts, meanwhile, are speculating that Trump wants to prolong trade talks for his own interests.
“Trump himself wants to drag out the deal until election time, then make a deal at the last minute to maximize political benefit,” Song said.
Wang Yong, director of Peking University’s Center for Political Economy, agreed that U.S. elections were influencing Trump’s decisionmaking and added that Trump’s high-pressure style of deal-making was not effective given China’s current domestic situation.
“He only thinks about American domestic politics and elections. He needs to win. But he is not sensitive to the domestic politics of the other side,” Wang said.
“He’s a gambler, the biggest gambler who’s willing to take the highest risk for highest profit. But between two superpowers, this tactic doesn’t work.”
China wants to make a deal because its economy has been hurt by the trade war. A report released Thursday by the National Committee on U.S.-China Relations and Rhodium Group found that two-way U.S.-China capital flows are at their lowest six-month value in five years.
Major U.S. companies including Dell, HP, Apple, Intel, Google and Amazon have announced downsizing of their China operations, while Chinese companies including Lenovo and Huawei are downsizing in the United States.
But it’s a delicate time for Beijing. Oct. 1 is the 70th anniversary of the People’s Republic of China’s founding. Authorities are preparing a national celebration meant to showcase China’s rise and newfound wealth and power, and they don’t want to be mired in a U.S. trade war.
Ongoing protests in Hong Kong, an upcoming election in Taiwan centered on relations with China, and international pressure on China for placing minority Muslims in internment camps are all adding to the Chinese government’s sense of insecurity, Wang said.
“Chinese people are very emotional and very anti-U.S. right now,” he said. “It isn’t appropriate to look weak.”
Domestic politics on both sides have made aesthetics a crucial part of negotiation. It will be up to Chinese and U.S. negotiators to try and “package” a deal that can make Trump look like a “winner” while also letting Beijing claim the agreement is “win-win,” Wang said.
If new tariffs are implemented Sept. 1, China is likely to retaliate with countermeasures including tariffs on U.S. imports; restricting market access including for financial institutions, which have been eager to operate in China; pressuring U.S. businesses that already operate in China; and trying to hit Trump’s electoral base by restricting agricultural purchases.
The consequences would hurt U.S. consumers as well as U.S. and Chinese companies.
“These tariffs, if implemented, will hit many thousands of American businesses who rely upon Chinese-made inputs and, ultimately, American consumers,” Nelson Dong, a member of the board of directors of the U.S. nonprofit National Committee on U.S.-China Relations, said in an email.
“Foreseeable Chinese retaliatory measures will almost certainly seal off any opportunity that U.S. supplies (especially in the agricultural sector) could regain their lost markets in China. Between higher prices and lower income, American economic pain will then increase in depth and breadth, as usually happens in trade wars involving tariffs, counter-tariffs and other retaliation,” Dong said.
One definite outcome regardless of whether the tariffs are implemented or not is that China will accelerate its efforts to strengthen domestic industry and diversify trade ties apart from the United States.
China is moving to increase its imports of soybeans from Russia, for example, as well as from Brazil, which has replaced the United States as China’s main source of soybean imports and is expected to surpass the United States as the world’s top soybean supplier this year.
“China is starting to buy from other places, including central Asia, Kazakhstan, Russia — diversification is already happening. This in the long term is not good for America,” Wang said, adding that uncertainty caused by the trade war is also spurring China’s drive to shift from an export-dependent economy to one driven by domestic consumption.
“This trajectory has already begun, and for a long time it’s what China has needed. This is something necessary for China to really become an economic superpower,” Wang said. “So, in some sense, we should thank Trump for his help.”