Possible ways in which China can retaliate to Trump tariffs

 | Updated: Aug 02, 2019, 09:03 PM IST

Beijing says it is ready to retaliate if President Donald Trump goes through with his threat to impose punitive tariffs on another $300 billion in Chinese goods on September 1. Here are some of the possible next moves China can take to meet 'counter measures' against US.

Beijing's retaliatory charges

Beijing has already levied retaliatory charges on almost all US goods arriving in China roughly $110 billion out of an annual total of $120 billion.

But the size of the tariffs currently range from five to 25 per cent and Beijing could easily hike them a further 10 per cent or more.


Tariff tussling

'US farm and energy products are very reliant on China's market, if we raise tariffs on these so they're even higher, Trump's base voters will feel the pain worse,' said Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges.


Halt farm goods purchases

The multiple rounds of tit-for-tat tariffs have already battered trade, with China's American imports shrinking 30 per cent in the first half of the year.

American farmers had looked set for some relief this week after China said Thursday that some firms had begun purchasing more US produce and others were making price inquiries on soybeans, sorghum and grain.

'While we don't think China will necessarily raise its tariffs on US goods, we expect it to back away from recent 'efforts to show goodwill', mainly the resumption of purchases of agricultural goods,' said Louis Kuijs of Oxford Economics.


Devalue the yuan

Trump regularly accuses the Chinese central bank of devaluing its currency to support exporting firms  Beijing has long denied the charges.

Allowing the yuan to fall could help offset the threatened 10 per cent tariffs, but China's financial policymakers also worry a falling currency could precipitate capital outflows, an equally damaging proposition.


China's reference rate

China's central bank on Friday held its reference rate for the daily fixing of the yuan at 6.9 to the dollar in onshore trading while the more freely traded offshore yuan tumbled as low as 6.9786 to the dollar according to Bloomberg  suggesting Beijing does not yet want to let its currency fall below 7 yuan to the dollar.  


Penalise businesses

China could make life difficult for US companies in the form of regulatory requirements or customs blockages.

Beijing 'could increase its trade counter-measures by applying more non-tariff measures to US imports,' said Rajiv Biswas, an Asia economist at IHS Markit.


Hurdles to import goods

'Non-tariff barriers can create significant hurdles to imports of goods, particularly for perishable items,' said Biswas, noting US farm goods would be vulnerable.  

'We are particularly concerned about increased regulatory scrutiny, delays in-licenses and approvals, and discrimination against US companies in government procurement tenders,' said Craig Allen, president of the US-China Business Council.


Boycott and blacklists

China in May said it would release a blacklist of "unreliable" foreign companies and individuals, hitting back after the United States targeted its telecom giant Huawei with an export ban, curbing its access to crucial US-made components. 

This summer China's commerce ministry has repeatedly said the measures will be released "soon" and another escalation could lead Beijing to finally publish its list.


Curbing tourism to punish certain countries

China could also mobilise its legions of consumers. Amid frosty relations with Japan in 2012 and South Korea in 2017, boycott campaigns led to a 50 per cent collapse in sales for both countries' car brands in one month.

Beijing has also been suspected of curbing tourism to punish certain countries.


Rare earth minerals

Chinese state media have also dangled the threat of cutting exports of rare earth minerals to the United States a key resource used in the production of everything from smartphones to military hardware.

In response, the US vowed to take "unprecedented actions" to ensure its supply of strategic elements and rare earth, but the planned investment and development of domestic supplies could take time to ramp up.