Beijing will immediately retaliate against President Trump’s new tariffs on $200 billion in Chinese imports, setting the stage for a protracted dispute that could raise prices of household goods in both countries.
Chinese president Xi Jinping has refused to budge amid mounting threats from Trump, who vowed to place higher border taxes on practically everything the United States buys from the China if Beijing unrolls new duties next week.
“In order to safeguard our legitimate rights and interests and the global free trade order, China will have to take countermeasures,” the country’s Ministry of Commerce said in a statement. “We deeply regret this.”
The Chinese government previously warned it will hit back with tariffs on an additional $60 billion in American goods following Trump’s escalation, which would slap higher border taxes on nearly all U.S. exports to China.
Foreign Ministry spokesman Geng Shuang said Tuesday that China had not yet decided what countermeasures to deploy. “We will release them in time,” he said.
Analysts say Xi’s defiance reflects his desire to present China to the world as a superpower.
“China needs to show that it will stand up to Trump and the United States in order to demonstrate to the rest of the world that it is now America’s rival,” said Shaun Rein, managing director at the China Market Research Group in Shanghai.
Trump’s latest measures inject uncertainty into the status of the trade talks, Chinese officials said, suggesting the commercial battle between the world’s two largest economies could drag on indefinitely.
Beijing said it hopes the American president will “correct” his actions before the Sep. 24 deadline, urging the White House to consider the far-reaching consequences. Economists say the cost of consumer products such as air conditioners, furniture, lamps and handbags will rise, since many American manufacturers build goods on Chinese soil.
But Trump has pledged to punch back if Beijing retaliates, this time on $267 billion in Chinese products.
China purchased roughly $130 billion in American goods last year — less than a third of what the United States ordered from Chinese enterprises. Now Beijing is poised to impose higher border taxes on a total of $110 billion in U.S. products.
In an August statement, China’s Commerce Ministry said it would respond to Trump’s latest round of tariffs with duties on more than 5,200 types of American imports, including industrial parts, chemicals and medical instruments.
Ni Feng, deputy director of the Institute of American Studies at the Chinese Academy of Social Sciences in Beijing, said he expects a swift response from the Chinese government.
“After his list is out, then China’s countermeasures will follow,” Ni said.
Chen Dingding, founder of the think tank Intellisia in Guangzhou, said China will continue to welcome negotiations.
“We will fight and talk at the same time,” he said.
China’s vice premier, Liu He, was expected to visit Washington next week to restart negotiations with Treasury Secretary Steven Mnuchin, but analysts say the $200 billion development likely knocked that meeting off the table.
Fang Xinghai, vice chairman of China’s securities regulator, said at a forum in Tianjin on Tuesday that Trump’s tactics have “poisoned” the dealmaking atmosphere.
Trump’s announcement landed in China on Sept. 18, a day considered the start of Japanese aggression 87 years ago and an anniversary some Chinese see as an informal day of national humiliation.
Beijing has said it would also unleash “qualitative” measures against the United States, which some American firms have interpreted as heightened regulations and stalled visas.
The threat of more tariffs on $60 billion in U.S. products — and Trump’s pledge to target another $267 billion in Chinese goods if that retaliation materializes — has concerned the American business community in China.
“Contrary to views in Washington, China can — and will — dig its heels in and we are not optimistic about the prospect for a resolution in the short term,” William Zarit, chairman of the American Chamber of Commerce in China, in a Tuesday statement.
China has maintained that it’s well positioned to withstand blows in a geopolitical tussle, even as the nation’s growth is projected to slow this year.
The country’s central bank, meanwhile, has allowed its currency to slide about 5 percent since January, giving Chinese exports an edge in overseas markets while making imports costlier. (On Tuesday, it cost 6.88 renminbi to buy a dollar.)
Analysts say the People’s Bank of China probably won’t greenlight much more tumbling since a fading RMB could spook more assets out of the country.
“The weakening of the RMB could help offset the new tariffs,” said Larry Hu, chief China economist at Macquarie Commodities and Global Markets, a consultancy in Hong Kong. “However, it will also hurt China itself.”
Other signs of weakness in China’s economy as the trade war escalates include cooling consumer spending, slowing infrastructure investment and a relatively low but growing rate of corporate bond defaults.
The Shanghai Composite Index, meanwhile, has plummeted more than 20 percent since the year’s start, with losses snowballing after Trump launched the trade war.
Some analysts have predicted the business uncertainty will prompt layoffs in China, which currently has a tight labor market, with unemployment at 3.8 percent.
But demand for Chinese products on American soil has jumped amid rising tensions: the latest census data, released Wednesday, showed the U.S. goods deficit with China this year has grown about 8 percent to $234 billion from the same time last year.
Deutsche Bank economists Zhiwei Zhang and Yi Xiong estimated in a September analysis that an escalated trade war will shave only a half percentage point off the country’s growth. Goods to the United States, they noted, accounted last year for just 12 percent of China’s total exports.
“The Chinese authorities likely feel no urgency to give in and agree with all the terms the U.S. side requested,” Zhiwei and Yi wrote.
Tim Stratford, former Assistant U.S. Trade Representative and managing partner of the global law firm Covington’s Beijing office, predicted at a World Economic Forum panel in Tianjin on Tuesday that the conflict will see no winner soon.
“They’re concerned the U.S. motivation is wanting to keep China down,” Stratford said. “I expect therefore we’re going to have a deadlock for quite some time.”