Will Beijing Downplay Trade War, Buy More US Goods Or Escalate Tension? News24 –

Will China downplay the tariff war with the US and cooperate with Donald Trump’s administration, taking a cue from Canada and Mexico?

Will Beijing implement the trade deal with Washington signed in 2020, when Donald Trump became the US President for the first time?

As the Chinese economy has slowed down amid surplus capacity and production, will the Xi-Jinping-led Chinese government negotiate with his administration and find a win-win situation instead of going for an all-out trade war?

China Retaliates To US Action

In what may be called a knee-jerk reaction or a retaliatory step, Beijing imposed a 15% tariff on coal and liquefied natural gas, besides a 10% tariff on crude oil, farm equipment, large-displacement vehicles and pickup trucks coming from the US. It was in response to the US decision to impose 10% tariff on all Chinese goods.

Beijing also banned the export of critical minerals like tungsten, tellurium, ruthenium, molybdenum and ruthenium-related items.

The Chinese Commerce Department justified the decision saying it would “safeguard national security interests” of the country.

Chinese stock market reacted sharply as Hong Kong-based Hang Seng share index jumped by almost 2.8%. Another Asian share market South Korea’s Kospi also rose by 1.3%.

On the other hand, UK-based FTSE 100 fell 31 points to 8,551 shortly after opening in London.

Will China Negotiate With US?

However, analysts believe, China may have other plans instead. It is indicated by the fact that Beijing initially reacted to the US decision by declaring to take the matter to the World Trade Organisation. It is a highly symbolic announcement and means nothing.

If reports are to be believed, China has indicated to implement the trade deal signed with the US in 2020, when Trump was the president in his first term.

Will China Buy More US Goods?

According to the 2020 US-China trade deal, Beijing agreed to buy Chinese goods worth $200 billion every year. However, Beijing imported goods worth only 58% of this amount as Corona pandemic arrived, bringing an end to the deal.

In the meantime, the trade deficit between the two countries soared to $391 billion.

The US-China trade relations worsened further during the presidency of Joe Biden, who expanded the curb on the exports of state-of-the-art chips to China. It was seen as an attempt to prevent sensitive US technologies from being used in Beijing’s military arsenal.

What Is US-China Trade Deal 2020?

He also imposed tariffs on goods related to green energy, cars and batteries arguing that Beijing give massive subsidies and it could flood global markets with cheap goods.

Joe Biden accused Beijing of “cheating” rather than competing and import tariffs on imports of Chinese goods worth $18 billion in May 2024.

Consequently, the tariffs on electric vehicles quadrupled to 100% and the tariff on semiconductors increased from 25% to 50%.

Analysts believe China can not take the risk of another round of high-rate tariffs at a time when its economy has somehow managed to meet the target.

The Chinese economy recovered remarkably in the fourth quarter of 2024 and grew by 5.4% year-on-year.

Analysts believe, if China is caught in a trade war with the US, it will lose the momentum it has picked up. It may take the strategy of playing down the trade war at least for the time being.