China has shied away from negotiations and is hoping for an instant resolution with Washington.
Beijing released a comprehensive package of punitive measures over the weekend that demonstrated no cause for alarm that the world’s two largest economies are on the verge of full dispersion.
Beijing” may continue to take steadfast measures to safeguard its independence, stability, and advancement interests,” according to the Chinese Ministry of Foreign Affairs.
No hollow danger was presented by this reminder. Beijing slapped a crushing 34 % tariff on all US goods within hours, adding 10-15 % tariffs to the already-imposed ones earlier this year. This is a resemblance to the most recent US increases.
This increase is proper rather than just economic.
China stifled exports of important rare earth products, which are essential for the world’s tech and defense sectors, and prohibited them from supplying dual-use technologies to a dozen US companies, focusing mostly in aerospace and defense.
Beijing expanded its “unreliable entities listing,” properly blacklisting 11 further American companies from operating openly in China, making things even more provocative.
The developments from this weekend should be a cool wake-up call for those still hoping for a political off-ramp. Beijing’s change is no reactive; rather, it is planned.
In the face of Beijing’s rebellion, it is doubtful that Trump administration officials will loosen their position in the face of this situation, some of whom view this time as an opportunity to intensify the economic uncoupling between the US and China. In reality, additional round of US taxes are now all but unavoidable.
The financial harm is already being calculated. The US weighted average tariff rate on Chinese goods will increase to a staggering 65 % in combination with China’s countermeasures.
That would severely depress expansion for China this year, cutting 1.5 to 2 percentage points off of exports, a house crisis, and negative pressures.
China appears willing to bear the pain despite the rising growth challenges.
Why? Given that Beijing has come to the conclusion that any deal being discussed today would only be a temporary truce, not a real peace, and that the US is determined to prevent China’s rise. It is preferable in China to withstand short-term suffering than to take a long-term corporate disadvantage.
This calculation has geological implications. The period of managed competition is really over if China, the second-largest economy in the world, is willing to sacrifice near-term wealth in favor of proper autonomy.
Global markets are going through a severe adjustment, with some also believing cooler heads may prevail.
Buyers, organizations, and policymakers must reevaluate in light of this situation. The conflict between the US and China no more revolves around who blinks second. Who you hold their breath the longest is the subject?
More taxes, tit-for-tat restrictions, and corporate decoupling are likely to establish the connection between Washington and Beijing in the upcoming weeks.
Both sides are gearing up for a protracted, bloody fight that will forever alter world commerce, finance, and politics.