American taxes on Chinese imports are being doubled. Chinese nationalist blogs liken President Trump’s taxes to a war declaration. Beijing will “fight to the end,” the Foreign Ministry of China has vowed.
As tensions between the two largest powers in the globe have increased, they have been toying with the concept of economic decoupling for years. The likelihood of such a divorce is closer than ever due to the pace of their trade relationship’s decline this week, both in words and deeds.
In response to China’s retaliatory tariffs on U.S. goods last week, the Trump administration threatened to raise taxes on Chinese exports by an extra 50% on Wednesday. The current minimum duty on imports from China is an astounding 104%.
The trade dispute could get out of hand and escalate tensions over other areas of competition, such as technology and the future of Taiwan, the self-governing island claimed by Beijing, as Mr. Trump and China’s top leader, Xi Jinping, are engaged in a game of chicken and neither is willing to risk appearing weak by making a concession.
One of China’s few present economic bright spots is at the center of President Trump’s attack on the international trading system. Give credit… The New York Times/Eric Lee
Mr. Trump is a unique force in American politics because of his bare-knuckle methods. However, Mr. Xi is up against a rival who has weathered the storm of China’s political purges in the latter half of the 20th century and who believes that the US’s competing strategies are ultimately meant to undermine those of the governing Communist Party.
According to Scott Kennedy, a senior adviser at the Center for Strategic and International Studies, a think tank in Washington, “Trump has never engaged in a back alley fight where the opposing side is willing to fight and use the same kind of tactics as him.” This is a matter of sovereignty for China. The Communist Party’s grasp on power is at issue here. It might just be a political campaign for Trump.
Already fragile due to a real estate crisis, China’s economy now confronts the threat of a worldwide recession and a catastrophic downturn in trade, which is its key sector and development engine. Chinese censors seemed to be restricting hashtag searches on social media, a symptom of Beijing’s increasing uneasiness.
Regarding Wednesday’s duties, Wu Xinbo, head of Fudan University’s Institute of International Studies in Shanghai, described them as “a huge shock to the China-U.S. economic relationship, like an earthquake.” “Whether this is a short-term upheaval or a long-term, inevitable trend is still up in the air.”
Indeed, a decoupling between the United States and China is still a long way off. American and Chinese businesses, such as Starbucks and TikTok, are nevertheless well-established in their respective nations. Additionally, Chinese banks are still bound to the financial system that is controlled by the US dollar.
According to Mr. Kennedy, China and the US are still in the brinkmanship stage, when both countries are attempting to pressure the other into making a concession. However, if the Trump administration targets Chinese financial institutions, such as by removing Chinese banks from the international payments system Swift or canceling their licenses to operate in the US, the dispute might get more serious.
Beijing has portrayed itself as a victim of unfair American trade practices and protectionism in its response to Mr. Trump’s actions. Ironically, by restricting foreign investment and supporting Chinese companies, China has done the same—if not worse—over the years.
