By Joe Cash and Ryan Woo
BEIJING (Reuters) – China’s measured response to the U.S. decision to raise tariffs on $18 billion worth of Chinese goods, from syringes to batteries, suggests that relations between the world’s two biggest economies face more frost rather than a new shooting over commerce.
China denounced the Biden administration’s action and promised “resolute measures” to protect its interests.
But Beijing’s response also suggests a new dynamic – and confidence – compared with 2018, when Trump-era tariffs on $300 billion worth of Chinese goods triggered an escalating trade war, analysts said.
Among the differences between then and now: Biden’s White House flagged potential measures in advance to Chinese officials and the tariffs target industries, including EVs and batteries, where the economic impact is limited and Chinese companies’ dominance appears unassailable.
In response to the tariffs, Chinese state media outlets have fired back, accusing the United States of subverting its own free trade principles and taking measures that threaten climate goals and will increase costs for American consumers.
In essence, the argument goes, you are harming yourself.
This marks a departure from the tone of 2018, when a Chinese negotiator said Washington was putting “a knife to China’s neck” and state media suggested extreme countermeasures, such as a boycott of U.S. food imports or a sale of US bonds.
“China can take the moral high ground,” said Wang Huiyao, founder and president of the Beijing-based Center for China and Globalization, a think tank. “Doesn’t play with those who break international standards and norms.”
In the harshest language of its response, the Chinese Ministry of Commerce said the White House broke the spirit of an agreement for stable bilateral relations reached by Chinese President Xi Jinping and the US president. Joe Biden late last year in San Francisco.
Biden has said he wants to win this era of competition with China but not launch a trade war, and U.S. officials have sought to engage Beijing in limited areas of cooperation, including climate change.
“WHAT DOES NOT KILL YOU”
China has time to react with specific actions before the tariffs take effect, analysts said. But a lot has changed since the drop in trade in 2018.
That year, Chinese automakers built just under 800,000 electric vehicles. By 2023, electric vehicle production had increased eightfold, China had surpassed Japan as the world’s largest auto exporter, and Chinese automakers were beginning plans to expand from Southeast Asia to Europe.
Huawei, which had been hurt by US sanctions in 2019, has recovered, leading demand for chips made in China and challenging Apple in the smartphone business in China and Tesla in the case of electric vehicles.
“What doesn’t kill you makes you stronger,” Xinhua said in a commentary on US tariffs. “It seems the famous quote applies to China’s technology companies.”
Beijing knew this round of tariffs was coming. In recent visits to China, US Treasury Secretary Janet Yellen and others conveyed the message that China’s industrial capacity to produce more electric vehicles, solar panels and batteries than its economy can absorb was a risk to its American jobs and businesses.
Chinese officials and state media have rejected that argument, saying the country’s electric vehicle makers dominate because of innovation and supply chain advantages, not subsidies.
The United States imported $427 billion worth of goods from China last year and exported $148 billion to the world’s second-largest economy, a trade gap that has persisted for decades and has become an increasingly sensitive issue in Washington.
Both 2024 presidential candidates are taking a tough stance toward China ahead of the November elections, a context Chinese officials understand, analysts said.
“Does China really want to go to the mat fighting over these tariffs?” said Sean Stein, president of the American Chamber of Commerce in China, who said the announced action was “at the lower end” of expectations.
“The implementation in the US has been contained,” he added.
Beijing will also consider who it would prefer to work with once the elections are over.
“The thing about this Biden initiative is that it is driven by the election,” Wang said. “It’s different from what Trump did, since he had already been president for a year and so he was fighting a trade war, instead of elections.”
(Reporting by Joe Cash and Ryan Woo; Editing by Kevin Krolicki and Kim Coghill)
