China may target Trump-voting states in trade war
China could hit back hard at Donald Trump’s new tariffs by targeting agricultural goods and other products from states that voted for the US president.
The world’s second largest economy warned again on Thursday, hours before Trump’s announcement, that it was ready to “take all necessary measures to resolutely defend its legitimate rights and interests”.
Beijing has not specified what products would be hit, but a state-run newspaper has dropped some major hints.
Here are some potential targets:
The state-controlled Global Times newspaper encouraged China this week to impose “strong restrictive measures” against American soybeans.
It would be a major blow to US farmers, as a third of their soybean exports go to China, which totalled $14 billion last year.
The political stakes are high: Trump defeated Hillary Clinton in the 10 top soybean-producing states in the 2016 election.
In February, China’s commerce ministry opened an anti-dumping investigation into sorghum imports from the United States. China imported $1 billion worth of the grain last year.
Kansas went heavily for Trump in 2016 and was by far the US’s largest sorghum producer last year. The state’s vast sorghum crop was followed in size by Texas, Colorado and Oklahoma.
Boeing sells a quarter of its production to China, which is the world’s second largest aircraft market.
The US aerospace giant estimates that China will need more than 7,200 commercial airplanes in the next 20 years.
While Boeing and its European rival Airbus are currently equally sharing the Chinese market, the balance could easily tip against the US company.
“China could regulate the purchase volume of Airbus or Boeing aircraft,” the Global Times suggested in a January editorial after the US imposed tariffs on solar panels.
Another Trump state, South Carolina, is home to a final assembly and delivery facility for Boeing’s 787 Dreamliner.
Last month, China’s commerce ministry said it had found dumping of styrene imports from the United States, Taiwan and South Korea, in an initial ruling during a continuing trade probe into the chemical.
Styrene is the building block of many plastics. It is used to make foam packaging and many disposable plastics.
Last year, China imported 3.2 million tonnes of the chemical worth more than $4 billion from the US.
Beef, cars, universities
The Global Times offered a wide-range of other options in its January editorial.
China could tighten its health and safety standards on US beef imports.
Noting that the country of 1.4 billion people is the world’s biggest car market, the newspaper said: “If not for car buyers in China, US automobile sales would plummet.”
The Global Times suggested that China could also restrict the number of Chinese students going to US universities.
“Chinese students have pumped billions into the US economy through tuition, fees, and housing. This revenue stream alone impacts many levels of US society, and China controls it,” it wrote.
“Trump’s determination to start a trade war is questionable since nothing good would come of a Pyrrhic victory for the White House.”
China is the world’s top holder of US debt with nearly $1.2 trillion in American bonds.
Bloomberg News reported in January that Chinese officials had recommended slowing or halting purchases of US Treasuries.
Asked whether China could hit back through its debt holdings, Premier Li Keqiang merely told a news conference on Tuesday that Beijing was “a responsible long-term investor” that has always diversified its reserves along market rules.
But playing with the US debt could backfire as it could lower the value of Beijing’s own US bonds and dollar reserves.
Despite the heated rhetoric, China could hold off on imposing severe counter-measures in the immediate term.
“While Beijing would clearly have options to retaliate, China realises that, with its exports to the US so much larger than its imports from the country, it is more vulnerable in a trade war,” Louis Kuijs, head of Asia economics at Oxford Economics, wrote in a note in January.
If the US measures are manageable, Kuijs said he expected China’s to take a “relatively restrained” response by issuing strong verbal protests or exerting pressure on US businesses in China in a “low-profile way” through inspections, tests and delays in procedures.
Such a cautious strategy would allow China “to keep ‘the moral high ground’ as a supporter of globalization,” he wrote.