Countering US Tariffs: China's Economic Strategy (Part 2)

"If we focus only on self-reliance and import substitution, China risks becoming another Soviet Union." – Zhang Yansheng

This is part two of yesterday’s post.

Key Points

1. Trump’s threats to raise tariffs on China could either be genuine or just a negotiating tactic.

2. Implementing such tariffs would entail huge administrative costs, which might deter the new administration from imposing them.

3. If enacted, there is broad consensus in China to avoid a tit-for-tat response.

4. Although domestic pressure to retaliate could arise, Beijing will probably respond by strengthening its commitment to free trade.

5. However, this does not mean China would accept new tariffs passively; rather, it would seek ways to circumvent them.

6. Although a small faction of “extremists” in Washington advocates for tariffs, the broader American business community remains committed to trading with China.

7. Regardless of his intentions, Trump cannot compel other countries to act against their own interests.

8. China cannot fully offset the impact of high tariffs through yuan devaluation. A more effective strategy would involve further liberalising the econo…