China has constantly been under pressure since the start of the presidential campaign by Donald Trump. He did not hesitate to name China as a currency manipulator, and he didn’t want trade surplus with any nation. Trump has repeatedly said that certain trade deals must be canceled or renegotiated as they are not fair for the Americans. China has one of the biggest economies that relies heavily on exports. Especially, Chinese products sold in the USA has helped the economy of the country back home. Trump hints that this situation might change rapidly.
Before the G20 meeting, the US Treasury Secretary, Steven Mnuchin had said that the USA is not interested in trade wars. The country only wants to cancel or change deals that are not good for the USA citizens. The Chinese government has taken the hint, and it is preparing contingency plan when Trump starts a trade war. Trump had warned that he would charge additional tariffs and trade penalties from countries that export more than import from the USA.
The Chinese officials confirmed that China is not looking to start a trade war, but if the USA takes a side, the country needs backup plans. The policy advisors of the USA are hoping to increase tariffs on specific sectors with a surplus. China has a huge surplus exporting steel and furniture and state-owned firms. When trade penalties are imposed, it could easily increase the export cost of China.
China could find other suppliers in the world for agricultural products, manufactured goods, and machinery. It could also reduce the exports by cutting down on exporting laptops and mobile phones. China also can recover the penalties through the US companies in China. Additional taxes or restrictions could be imposed on the huge USA firms. China may also limit the power exerted by the USA on the services sector of China.
Experts in the industry suggest that the countries could come together and find a solution through consultation and co-operation. Retaliation will affect not only the economies of China and USA, but it will also have a global impact. The Chinese want to ensure that they are open to negotiating, but they need to have a plan should something go wrong.
While Trump has constantly accused Beijing of manipulating currencies, the Yuan hasn’t been manipulated in the past few years. Premier Li Kequiang had said that Beijing doesn’t want to get involved in a trade war. He urged the US government to hold talks to arrive at a common ground. A similar thought was reflected by Mnuchin during his G20 meeting. Rex Tillerson, the Secretary Of State of USA, visited China recently. However, there were no indications about the trade intentions.
President Xi Jinping will be hosted by Trump in the upcoming month. The G20 meeting created some uncertainty in the market because the global leaders supported the protectionist policies of the United States even though no compromise was made after the two-day meeting.