BEIJING — President Trump imposed tariffs in July on $34 billion in Chinese goods. China matched them dollar for dollar with its own.
Then he hit an additional $16 billion in goods in August. China matched that, too.
Now, Mr. Trump has made his biggest move yet, announcing 10 percent tariffs starting in a week on $200 billion a year of Chinese goods. But this time, China can’t match them all — and that crystallizes a growing problem for Beijing.
China’s tit-for-tat responses have so far failed to thwart Mr. Trump’s trade offensive, and with the White House ramping up the fight again, Chinese leaders aren’t sure how to respond, people briefed on economic policy making discussions say.
Chinese officials “are generally confused,” said Raúl Hinojosa-Ojeda, a trade specialist at the University of California, Los Angeles, who has been traveling around China speaking with officials, businesspeople and workers.
Chinese officials know what they don’t want to do. They have rejected one idea that would replace the matching tariffs with a more sophisticated system, said the people briefed on the discussions, who spoke on the condition of anonymity because of the fragility of the deliberations. That response — discussed in detail within the Commerce Ministry and other agencies — would have led to lower tariffs on American goods in dollar terms, which could be seen as a fig leaf to the White House.
That approach would have recognized a potentially expensive new reality for Beijing: The tariffs may be here to stay. Mr. Trump is suffering from weak approval ratings and could lose influence in congressional elections in November. But while Democrats have opposed most of his agenda, many have supported his attacks on trade with China. Even if Mr. Trump leaves office in two years, there is little guarantee that his China trade policies will be changed.
In Beijing, proponents of the new approach, which would scale down China’s tariffs in dollar terms to reflect the lopsided trade imbalance between the two countries, say Chinese leaders could still revisit the idea because it offers them a way to contain the damage and soothe tensions.
China’s leaders “don’t really want to engage in a dollar-for-dollar retaliation,” said Yu Yongding, a prominent economist at the Chinese Academy of Social Sciences. “Their purpose is to stop this trade war.”
China’s other options are limited.
It could punish American businesses that depend on China. Already, its antitrust officials have effectively killed the $44 billion effort by Qualcomm, the semiconductor company, to buy a Dutch chip maker. China has also pledged to buy soybeans from other countries, but replacing voluminous American supplies will be difficult.
Other moves have already served as warnings, like delays at Chinese ports. Ford Motor’s Lincoln cars and other goods have sometimes been the subject of unusually lengthy customs inspections this summer, although the delays do not appear to have caused much financial harm.
“It is certain that China will have other, invisible retaliation against the United States,” said Mei Xinyu, a researcher at the Commerce Ministry’s policy research and training academy.
But more drastic moves, like closing factories or encouraging consumer boycotts of American goods, could eliminate Chinese jobs. They could also permanently damage China’s reputation as a place to do business and only accelerate corporate plans to look to other countries.
“It’s difficult to build a reputation, and easy to harm a reputation,” Mr. Mei said.
China could also guide its currency to a weaker level against the dollar. It has already nudged the currency a bit lower, making Chinese goods cheaper in the United States and partly offsetting the tariffs. But a weaker currency would make China’s imports more expensive, raise the risk of inflation and lead to a potentially damaging flight of money out of the country. It could also provoke further American retaliation.
https://www.nytimes.com/2018/09/18/...tion=click&module=Top Stories&pgtype=Homepage
