China Scrambles For A Coherent Counter Strategy As Trump’s Tariffs Begin To Hurt Economy

Chinese leadership appears to have been caught completely off guard by by United States (US) President Donald Trump’s protectionist measures primary targeted at China.

Effective 6 July, US imposed a steep 25 per cent tariff on imported Chinese products estimated at $25 billion. The move prompted retaliatory tariffs from Beijing. However an undaunted Trump administration now plans to escalate the tariff war by applying 10 per cent tariffs on additional $200 billion of Chinese goods. Trump has even warned of the possibility of slapping duties on every import from China.

The Wall Street Journal reports that a meeting of the Chinese Politburo, the apex body of China’s political leadership, was recently held focusing on the external challenges facing the Chinese economy.

While the Politburo did not explicitly mention the trade war with the US, the statement made by the body makes it clear that Trump’s tariff moves threatens growth in China. The statement acknowledged that the Chinese economy “faces some new problems and new challenges,” and also added that “there are obvious changes in the external environment.”

The meeting comes in the wake of recent data indicating that business activities in China slowed considerably in July, probably the first real time indicator that US tariffs can cause adverse impact on Chinese economy.

The Wall Street Journal noted clear signs of China’s slowing economic expansion, pointing to declining investments in factories and “anaemic” household consumption, just as defaults among corporations are increasing.

China’s ability to fight the tariff measures by Trump has been hampered to considerable extent by President Xi Jinping’s economic policies aimed at containing the country’s debt.

China registered a 6.8 per cent growth for the first half of 2018, but it is increasingly clear that its economy is under stress is due to its heavy debt burden and the real possibility of an impending trade war with the US.