The recent announcement from President-Elect Donald Trump about adding a 10% tariff to all Chinese products entering U.S. soil has the Asian behemoth preparing countermeasures for a possible upcoming trade war. Yesterday, Trump announced that this would be a retaliatory move regarding the continued entry of fentanyl into the country.
On social media, Trump declared that until this drug flow stops, his administration would charge “China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America.” In February, Trump affirmed he would slap “60% or higher” tariffs on Chinese products especially.
These measures, if enacted, might mean the intensification of a new trade war between the two countries. Since Trump hinted at establishing tariffs during his campaign, China has prepared to counter them. One of the tools available, the “Law on Counteracting Foreign Sanctions,” gives the government authority to “blacklist foreign companies, impose sanctions and restrict access to critical supply chains,” according to FT.
Alexander Strelnikov, founder of the Russian-Chinese company Rustranschina, stated that China had several strategies to counter the effect of U.S. tariffs. These include establishing similar tariffs for American products and barriers for companies to reach Chinese customers. In addition, Beijing can also exert increased controls over foreign investment in China, making it more complex for U.S. nationals and companies to position their businesses in the country.
In anticipation of these efforts, Chinese economists called to de-dollarize the national forex reserve to reduce risks associated with holding over $1.5 trillion in the form of an adversarial currency like the U.S. dollar. Recently, Zhang Ming, deputy director of the Chinese Academy of Social Sciences’ Institute of Finance and Banking, stated that China should address “the financial risks associated with possible future sanctions from the U.S.”
Read more: Reserves Threatened: China Urged to Dedollarize Its $3.3 Trillion Forex Stash