As the trade war between the United States and China intensifies, President Xi Jinping is poised to leverage a series of strategic pressure points to ensure that the American economy feels the pinch of President Trump’s escalating tariffs. Here’s how China plans to retaliate:
1. Hitting Consumers in the Wallet: Trump’s tariffs on Chinese goods are set to directly impact American consumers. With China being the world’s manufacturing hub for toys, electronics, and various consumer products, increased tariffs will translate to higher prices for Americans.
2. Punishing the Farmers (and More): American businesses that rely on exports to China are bracing for impact. Key sectors like oil, aviation, and agriculture, particularly soybean farmers, are at risk. China, the world’s largest soybean market, is already seeking alternative sources.
3. Targeting Individual U.S. Companies: Beijing is employing tactics like export controls, blacklists, and investigations to target specific U.S. firms. Recently, several U.S. companies were added to export control lists, restricting their ability to ship goods from China. Antitrust investigations have also been launched against major American corporations like DuPont, Google, and Nvidia.
4. Cutting off Supplies of Rare Earth Minerals: China has further restricted exports of rare earth minerals, a sector it dominates, in response to Trump’s tariffs. The U.S. relies heavily on China for these minerals, which are crucial for manufacturing semiconductors, missiles, wind turbines, and more.
5. Selling U.S. Debt: While considered a “nuclear option,” China holds over $761 billion in U.S. bonds. While economists doubt China will use this because it may hurt China too, the potential to dump this debt gives Beijing significant leverage.
6. Devaluing the Yuan: A sharp devaluation of China’s currency could boost Chinese exports and undermine the competitiveness of U.S. firms in the Chinese market.
7. Freezing Out Hollywood: China is a vital market for American entertainment. Beijing plans to reduce approvals for Hollywood films, with talks of a potential full ban. Shares in U.S. entertainment companies are already reacting to the reports.
While Trump believes the trade war will pressure China’s economy, Xi has multiple avenues to ensure Americans share the pain. The coming months will reveal the extent of the economic impact on both nations.
