'Trade wars a lose-lose game': Analysts say China mulls milder steps as Western nations pile on tariffs

As Western governments pile on tariffs, Beijing on its end, is likely to tread carefully to avoid triggering a global trade war, analysts say, because it realises what’s at stake for its economy – and in the process, could adapt its trade strategy by finding a silver lining in Southeast Asia for imports of its goods as the West steps up barriers. 

For months, China has been at heads with Canada and the European Union (EU), which have both followed Washington’s lead and imposed tariffs on Chinese imports, namely electric vehicles (EVs), batteries and solar panels, as well as Chinese steel and aluminium.

But even as Beijing announced on Monday (Sep 9) the start of a year-long “anti-discrimination” investigation in retaliation to Canada’s 100 per cent surtax on all Chinese-made EVs, the reality is that China’s economy simply cannot afford to engage in a trade war, analysts say. 

“The current economic situation in China is not in good shape,” said Dr Chen Bo, an economics professor at Huazhong University of Science and Technology in Wuhan.

“Beijing definitely understands how costly the trade war is. I don’t think it has any intention to trigger a trade war with any countries or economies, particularly with the EU. This is kind of a lose-lose game.”

China's economy is also “much weaker than two years ago,” said law professor Mr Henry Gao from the Singapore Management University, also a Dongfang Scholar chair professor at the Shanghai Institute of Foreign Trade. “Thus it might not withstand the negative effects of retaliations,” Mr Gao said.  

Beijing has set a goal of achieving 5 per cent real GDP growth for the year. In the second quarter, the economy grew by 4.7 per cent compared to the same period last year, which economists point out is significantly below expectations. This follows a 5.3 per cent growth recorded in the first quarter.

According to a Reuters poll released this week, China’s exports grew at their fastest pace in more than a year, rising more than expected in August as manufacturers rushed out orders ahead of expected tariffs. Import figures, however, fell short of expectations, the Reuters report said.

In a move to curb low-value shipments that allows China-founded e-commerce companies like Temu and Shein to ship their products more easily to the US, the Biden administration has come up with new steps that would prohibit this. 

Companies are no longer exempt from tariffs simply by shipping goods that they claim to be worth less than US$800, under the “de minimis” threshold, which US lawmakers have called a "loophole" that has allowed Chinese imports to evade tariffs and ship narcotics to America without customs inspection.

According to White House officials, the volume of packages entering the US under the US$800 threshold has exploded to more than 1 billion last year, from around 140 million a decade ago. They attributed most of the growth to Chinese e-commerce firms.

Source: Channel New Asia