Cairo: Hani Kamal El-Din
As Donald Trump steps back into the White House, the newly elected president has resumed his threats of imposing tariffs on key trading partners. While Europe is still calculating the potential losses from these protectionist measures, Beijing is taking charge: it has prepared a legislative framework to mount a strong counterattack. How does China plan to defend its interests against potential restrictions, and what consequences will this have for the United States?
Up to 40 Percent Tariffs
Trump remains true to his mantra: “America First.” The newly elected president intends to ramp up trade pressure on both allies and opponents, as the U.S. seeks to secure a trade surplus.
His first promise was to reinstate tariffs on imports, with a minimum of 10% for Europe, and up to 20% on certain categories of goods.
The approach towards China is even harsher. Currently, China accounts for 30% of global industrial production, compared to roughly 20% for the U.S. This imbalance is deeply unsatisfactory to the new president.
According to a Reuters survey of economists, China could face tariffs of nearly 40%. In Trump’s first term, the maximum tariff was 25%. These measures risk reducing the growth of the world’s second-largest economy by 1%.
Billions in Losses
Europe is evaluating the potential economic damage. The German Institute for Economic Research (IW) warns that the country could lose tens of billions of euros over the next four years.
The estimates are as follows: a 10% tariff would result in a loss of 127 billion euros, while a 20% tariff could cost as much as 180 billion. Germany’s GDP is expected to shrink by 1.5%, according to the report.
The European Union is already considering retaliatory measures. The European Commission is drafting a bill that could impose tariffs of up to 50% on some U.S. goods.
However, the EU’s resilience is limited. The continent has yet to recover from the energy crisis, with production in energy-intensive sectors dropping by 10-15%. The largest economies in the region are experiencing industrial decline, leading to deindustrialization. Energy prices in the EU are nearly twice as high as those in the U.S. Additionally, Europe’s reliance on American LNG gives Trump an additional leverage point.
Sanctions Law
China is also preparing its counterattack. In his previous presidential term, Trump launched a full-scale trade war with Beijing. The Chinese have since learned from those experiences.
As noted by the Financial Times, eight years ago, China was caught off guard by the U.S. implementing high tariffs, tightening investment controls, and imposing sanctions on Chinese manufacturers. This time, however, China has anticipated the potential escalation and is ready to act.
In particular, China now has the “Foreign Sanctions Countermeasures Law,” which allows it to blacklist foreign companies, impose sanctions, and restrict access to crucial supply chains.
The law also covers regulations on the export of dual-use goods in retaliation against states and organizations that “impede China’s development, seek to contain it, and suppress it,” according to a publication.
“We will, of course, try to resolve everything peacefully through negotiations. But if nothing works out, as it did in 2018, we will have to fight and protect our rights and interests,” said Wang Dong, Executive Director of the Institute for Global Cooperation and Understanding at Peking University.
China’s Ability to Strike Back
China has repeatedly shown that it can inflict significant economic damage on the U.S. For example, in 2018, Beijing imposed retaliatory tariffs on 128 U.S. goods.
More recently, in October, a U.S. drone manufacturer, Skydio, which supplies drones to Ukraine, was hit by Chinese sanctions. Chinese companies were banned from supplying “critical components,” leading to a shortage of batteries and forcing the U.S. to scramble for alternative suppliers.
This was in response to Pentagon sanctions against DJI, the leading manufacturer of civilian drones.
Europe has also felt the pressure. Under U.S. pressure, Europe joined the “chip war.” In 2023, Beijing banned the export of key rare earth metals used in semiconductor manufacturing. The EU relied on China for 71% of its gallium supply and 45% of its germanium.
What China Can Do
China has numerous tools at its disposal to influence the U.S., according to Alexander Strelnikov, founder of the Russia-China transport company RusTransChina.
These include tariffs, limiting access to Chinese consumers for American companies—making their operations more difficult and reducing profits. China could also resort to international market dumping to compensate for reduced exports to the U.S. Finally, increasing control over foreign investments would make it harder to do business in China.
Dmitry Khokhlov, an expert at the Russian-Asian Union of Industrialists and Entrepreneurs (RASPP), points out that while the U.S. is China’s second-largest trading partner after the EU, and many manufacturers rely solely on the U.S., these measures could harm China’s economy. However, they would also have a painful impact on Washington.
Several sectors of the U.S. economy would be affected, including technology, agriculture, automotive, and energy.
“Raising tariffs would harm major tech companies like Apple and Qualcomm, automakers like Ford and General Motors, as well as farmers and agricultural producers exporting soybeans and pork to China,” said Strelnikov.
Caution in Washington
Over the years of trade conflict with Washington, China has adapted. Additionally, Beijing has successfully redirected part of its exports to other countries. Between 2018 and 2023, the U.S.’s share of China’s exports fell from 19% to 15%.
Increasing import tariffs would accelerate inflation and reduce consumer activity. This would undermine the Federal Reserve’s efforts to control inflation by raising interest rates, says Evgeny Smirnov, head of the Department of International Economics and Relations at the State University of Management.
Thus, economists conclude that while Washington will continue to exert pressure on Beijing, it will be cautious about escalating trade policies. This situation could benefit Russia, as China’s financial sector and businesses, which are currently cautious in cooperating with Moscow due to the risks of secondary sanctions, may shift their focus towards Russia.
