The trade war is gaining momentum. Expert: China can reach for unconventional tactics

With the deterioration of commercial relations between the USA and China, the risk of economic war is growing characterized by the escalation of retaliation and transition to asymmetrical tactics – the Chinese analyst, Sari Arho Havren, assessed in an interview with PAP.

After the announcement on Thursday by the White House, another increase in customs duties for imports from China to 145 percent, Beijing responded for its own duties to products from the USA from 84 to 125 percent. At the same time, the Chinese Ministry of Finance assured on Friday that the next increases from Washington will be “ignored”, but China will “fight to the end”.

Havren – an expert of the Royal United Service Institute (Ruthenia), a Think Tank dealing with defense and security – when asked about potential SC reactions to the American customs duties, she pointed out that Beijing has a wide range of available options.

“In addition to duties, China has already implemented non -disgusting means to make economic pressure,” Havren noted, citing examples such as placing American companies on export control lists, limiting qualifications for specific goods from the US and announcing restrictions for Hollywood films. The expert also suggested that China can attack the service trade sector in which the US has long had a surplus, as well as initiate more investigations on intellectual property and cyber security aimed at American companies operating in the PRC.

“I expect China to be increasingly using asymmetrical agents, except trade,” Havren said, paying attention to the situation related to fentanyl smuggling as an example in which cooperation can be limited or suspended. The expert also provides for further investment restrictions, more severe enforcement of reports on environmental protection and compliance with labor law provisions by American companies in China and a strategic campaign aimed at challenging the US as a reliable global partner.

As for the future of US-China's commercial relations, Havren outlined three potential scenarios. The first and “most likely” is “prolonged economic war with continuous escalation.” The expert believes that none of the parties seem to be ready for compromise, and both governments put national resistance and economic sovereignty first.

In her opinion, the leader of the PRC “XI Jinping will not talk to (US President Donald) Trump, the Chinese do not work. They like to build a grassily case.” This scenario would lead to a reduction in trade volume, a decrease in investment, a negative GDP growth in both countries and interference in the global supply chain.

The second scenario includes “targeted negotiations regarding cooking sectors” such as agriculture and technology. Although Havren sees this possibility, he considers it less likely. “Both economies are based on some coinating sectors, such as agriculture and technology, and thanks to mediation it is possible to conclude a sector agreement,” she said.

Finally, Havren described “the real script +decoupling +”, i.e. disconnecting the two largest economies in the world, which may take a decade or longer. This reflects ideological incompatibilities, erosion of trust and focusing on “national immunity”.

“This would affect long -term and mass re -adaptation of global trading systems, higher costs, polarization between US and China trading blocks, global voltages. But also local possibilities and reindustrification in many areas” – assesses the interlocutor of PAP.

Referring to the pressure of the government in Beijing on independence and technological independence, the expert admitted that this policy brings mixed results. “During the rule of XI Jinping, China actively build immunity and implement a risk limiting policy. China strategically diversified their supply chains to reduce dependence on any single economy,” Havren believes.

Although China has become a leader in sectors such as artificial intelligence and renewable energy, “Chinese companies are still largely involved in importing in the semiconductor sector”.

Despite the efforts to increase domestic consumption, which is the biggest problem for the communist authorities of the PRC, the demand remains weak, and the potential for redirecting some products adapted to American or European markets is limited, and this “limits China's ability to fully balance the decreasing exports to the US” – emphasizes the expert.

From Beijing Krzysztof Pawliszak (PAP)

KRP/ AP/ LM/