Xi’s careful reply to Trump tariffs shows China has more to lose
US-China trade war made clear that Xi Jinping is taking a more cautious approach than during Donald Trump’s first term.
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After the US leader gave a last-minute reprieve to both Canada and Mexico, his 10% tariffs on China took effect after midnight Washington time on Tuesday. Within seconds, Beijing announced additional tariffs on roughly 80 products to take effect on Feb. 10, launched an antitrust investigation into Google, tightened export controls on critical minerals, and added two US companies to its blacklist of unreliable entities.
The swift but calculated retaliation signaled that Beijing had learned a lesson from its first trade fight with Trump, when China retaliated with tariffs on par or close to what the US imposed. This time Xi only put tariffs on $14 billion worth of American products, a sliver of what Trump targeted, while taking other measures that showed off China’s ability to inflict further pain on US companies if needed.
The shift reflects both Xi’s success at diversifying imports away from the US since Trump’s first term, as well as China’s more precarious economic situation. The Chinese leader has been relying on manufacturing and overseas sales to keep growth ticking along as he moves to burst a property bubble, all while dealing with increased deflationary pressure.
China is being restrained because it “has more to lose,” due to its huge trade imbalance with the US, according to Larry Hu, head of China economics at Macquarie Group Ltd.
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