China Prepares for Trade War Escalation as Trump Wins Second Term
Donald Trump's victory in the 2024 US presidential election has sparked concerns of a potential trade war escalation with China. Trump has threatened to impose tariffs of up to 60% on Chinese goods, a move that could have devastating effects on trade between the world's two largest economies ¹.
China has taken strategic steps to prepare for a potential trade war, expanding its toolkit to include export controls on critical raw materials, tariffs on agricultural goods, and an entity list that can target key American companies ². This move is seen as a shift in China's approach, from being caught off guard in 2018 to being more proactive and resilient.
"China, psychologically speaking, is much more prepared in dealing with him again," said Zhou Bo, a retired senior colonel in the People's Liberation Army and senior fellow at Tsinghua University's Centre for International Security and Strategy ².
The potential trade war escalation has already led to market volatility, with the yuan weakening the most in two years and Chinese stocks falling ². Goldman Sachs Group Inc. has warned that steeper trade restrictions on China may force President Xi Jinping's hand to bolster domestic consumption, something the Communist Party has traditionally sought to avoid.
- *Export Controls*: China may impose export controls on critical raw materials, such as rare earth minerals, to counter US restrictions on advanced technology exports.
- *Tariffs on Agricultural Goods*: China may impose tariffs on US agricultural goods, such as soybeans and corn, to target Trump's support base in the US Midwest.
- *Entity List*: China may add key American companies to its entity list, restricting their access to the Chinese market.
Despite the potential trade war escalation, China's Foreign Ministry has congratulated Trump on his election victory, saying it respects the choice of Americans ². However, President Xi Jinping would prefer to avoid a tariff battle that risks proving devastating for China's economy.
As the situation continues to unfold, businesses and investors are advised to remain vigilant and proactive, closely monitoring policy developments to better manage potential impacts on operations ¹.
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