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China would be wise to avoid going MAD in the trade war

19 0 5

Now that US President Donald Trump has imposed a 10 per cent tariff on yet another US$200 billion worth of Chinese imports, the US-China trade war has entered a costly new phase. As China follows through on its pledge to retaliate, the casualties will include more than half the bilateral trade between the two, with China itself suffering the most losses.

Whereas China exported US$506 billion worth of merchandise to the United States in 2017, it imported just US$130 billion of US goods. That means, in a dollar-for-dollar slugging match, China will quickly run out of steam. Lacking powerful counterpunches, China now has some of its most creative political minds searching for novel means of retaliation.

One idea, in particular, has attracted a lot of attention in the press, mostly because it comes from Lou Jiwei, a former minister of finance who now heads the National Council for Social Security Fund, China’s national pension fund. In a defiant speech at the China Development Forum on September 16, he proposed withholding exports of goods that American companies need, thereby severely disrupting US supply chains for three to five years at least.........

© South China Morning Post