The United States announced on May 14th that it would impose tariffs of $18 billion on seven categories of Chinese products, including lithium batteries, electric vehicles, solar panels, semiconductors, and surgical gloves. The tariffs on electric vehicles would increase from 27.5% to 100%; tariffs on lithium batteries for electric vehicles would rise from 7.5% to 25%; tariffs on solar panels and semiconductor chips would double to 50%. Other areas affected include key minerals, medical supplies, steel, and aluminum products, with tariffs being raised to 25%.
This is considered the most extensive tariff measure implemented by the United States against China since Biden took office. Analysts believe that this tariff action represents a further escalation of the U.S.’ “trade war” with China. For the Chinese Communist Party (CCP), this is like taking a heavy blow from the U.S.
During the routine press briefing on May 15th, Chinese Foreign Ministry spokesperson Wang Wenbin stated, “We urge the U.S. to abide by the rules of the World Trade Organization and immediately cancel the tariffs imposed on China. China will take all necessary measures to defend its own interests.”
The Ministry of Commerce of the CCP expressed a slightly different stance, stating that China would take “resolute measures to defend its own interests.”
Whether from the Foreign Ministry’s statement or the Commerce Ministry’s wording, whether it’s “necessary measures” or “resolute measures,” it seems like the usual rhetoric of the CCP, just tough talk. What the outside world is concerned about is how the CCP will respond to the heavy blow from the U.S. next.
Firstly, if China retaliates against the U.S., it could likely trigger a new round of U.S.-China trade war. This is something that the CCP, currently struggling in an economic quagmire, is desperately trying to avoid. But faced with the U.S.’ tariff offensive, the CCP cannot simply swallow its pride and stay silent.
Think about it, the CCP consistently promotes patriotism and nationalism, leading brainwashed individuals and nationalist zealots to hold deep-seated anti-U.S. sentiments. If this time the CCP doesn’t retaliate against the U.S., it will clearly be unable to justify itself to the domestic public, and where would it place its dignity?
Secondly, if the CCP truly wants to “defend its own interests,” its retaliatory options are actually limited, and it doesn’t hold many cards.
Data released by the General Administration of Customs of China shows that in January and February of this year, China’s exports to the U.S. totaled over 520 billion yuan, an increase of 8.1%! Meanwhile, imports were only over 180 billion yuan, with imports declining by over 7%.
This means that the total value of goods China sold to the U.S. in January and February was nearly three times the value of goods purchased from the U.S., with China earning real money from the U.S.
Usually, retaliation is based on relatively equal standings between the two parties, at least in terms of imports and exports being balanced. For example, China and Japan have relatively small trade surpluses or deficits, leading to mutual losses if a trade war were to occur.
The total amount of tariffs raised by the U.S. this time is $18 billion. Given the significant trade surplus between China and the U.S., even if China were to raise tariffs by an equal amount, it would not reach this figure, unless China’s tariff imposition exceeds that of the U.S.
Thirdly, would China impose higher tariffs on the U.S. if it retaliates? Definitely not.
Think about it, with the current poor state of the Chinese economy, stability and attracting foreign investment hold greater significance for the CCP than ever before. If China were to retaliate against the U.S. with greater force, it would undoubtedly have a huge adverse impact on stability and attracting foreign investment – something the CCP is unwilling to see and finds difficult to bear.
Additionally, if China’s counterattack is too strong, it risks inviting further retaliation from the U.S. Just like in the previous trade war, where the CCP initially resisted the U.S., resulting in U.S. tariffs escalating from the initial few hundred billion dollars to over $300 billion. Can the CCP endure a repeat of that situation?
Taking all factors into consideration, the CCP is likely to make a symbolic and restrained counterattack against the U.S. in the end. This aims to save face, justify itself to the domestic public, and, on the other hand, prevent the U.S. from escalating the trade war further, affecting the grand policies of stability and attracting foreign investment.