"We Will Not Sit Idly By" - Here's How China Might Retaliate Against US Tariffs

As we highlighted last night, China has threatened to respond to President Trump's steel and aluminum tariffs with unspecified actions that Chinese officials said could "seriously hurt the international trade order."

And as Axios warned in a piece published Friday, investors shouldn't interpret their lack of details as a sign of an empty threat: Rather, China actually has far more leverage with which to retaliate against the Trump tariffs than it did when George W Bush briefly imposed tariffs on imported steel in the early aughts. Back then, Bush rescinded the tariffs, it's widely believed, because the European Union threatened targeted sanctions that would hurt swing states like Michigan and Florida - states that Bush needed to carry during his 2004 campaign. Unsurprisingly, the EU is embracing a similar strategy this time around.

But today, China's ability to retaliate now rivals that of the entire European Union - which means this could be the last time the US can "set the agenda" in terms of its relationship with its largest economic rival.

Back in 2002, China produced less than 200 million tons of steel. As of 2016, China could churn out 1 billion tons, forcing Beijing to pare back production or risk a destabilizing glut.


Given President Xi Jinping's decision to abolish term limits, effectively clearing the way for him to serve as dictator for life, the country has the wherewithal and the political will to strike back. Mark Wu, a professor of international trade law at Harvard, said the country needs to do something - if only to save face.

"China has to do something [in response to Trump's tariffs] just to signal its own resolve," Wu said.

However, as Wu said, they likely won't retaliate with the full brunt of their capability, as China would probably be content with watching the Westerners fight it out among themselves.

Ahead of Thursday's announcement, Zhang Yesui, a top diplomat and former ambassador to the U.S., said:

"China does not want a trade war with the US ... [But] we will not sit idly by and will take necessary measures if the US hurts China’s interests."

Since the earliest days of his campaign, Trump has bashed China, citing the US's massive trade deficit with China as a sign that naive leaders and the "free trade" globalist establishment were allowing the US to be ripped off...all to benefit the coffers of wealthy elites. Meanwhile, in a sign that the US could be softening its stance, the Trump administration has reportedly asked China for a plan to shave $100 billion off the US's trade deficit with the No. 2 economy (also known as China's trade surplus).


As Axios sees it, there are two routes China can take: 1) it could retaliate by acting against US projects in China, denying US companies permits to operate in China, essentially blocking US companies from one of the world's most lucrative growth markets...2) it could engage in tit-for-tat retaliatory tariffs against specific US industries and products - much like the EU has threatened to do.

However, not everybody is convinced that China will follow through with a response beyond mere rhetoric: Nathan Chow, a strategist at DBS Group, wrote in a March 9 report that he doesn't expect the US's steel and aluminum tariffs to spark a "trade war" with China. Steel and aluminum account for only 3% of China’s total exports (though this figure masks the rampant trans-shipping whereby Chinese steel is dumped into other countries to mask its origins) and 0.6% of its GDP. Chow also argued that Chinese steel exports to the US are much smaller than the country's top three steel export destinations: South Korea, Vietnam and the Philippines.


But one key difference between the Bush tariffs and the Trump tariffs is that Trump invoked Section 232 of the Trade Expansion Act - the so-called "national security" justification, which leaves the door open for other WTO members to use a similar argument to justify retaliatory tariffs that COULD escalate into a trade war...


cheka Bumpo Fri, 03/09/2018 - 22:41 Permalink

oh look, another nyc.parasite scare tactic missive

tariff or continue to get bled out by the nyc.dc globalists

need flat tariff that covers ALL imports -- no matter which globalist megacorp is trying to import it

have the coast guard/customs collect the revenue before cargo is offloaded at US port.  customs/immigration ALREADY boards EVERY ship that comes from foreign ports

use revenue to reduce taxes on WAGES.  get back to the AMERICAN system (before skype takeover)


In reply to by Bumpo

38BWD22 cheka Fri, 03/09/2018 - 23:24 Permalink


Know what guys?

As a long-time free-trader, I had my doubts about the whole protection scenarios.  But, I now accept the idea of national security (so that AK Steel can keep making steel for large electrical transformers for example) and as retaliation for bad behavior (China's theft of intellectual property and their own trade barriers).

Yes, trade barriers may indeed drive up total costs (as domestic industry gets to cozily raise prices), but keeping some industries here in the USA is probably more important.

So, Trump is exploring interesting terrain here.  Not to mention his bluster may work in getting better deals as well.

Note that international trade is almost incredibly complicated, it's possible that there may be NO "good" solutions.

In reply to by cheka

philipat Duc888 Sat, 03/10/2018 - 19:22 Permalink

WRT manufacturing almost everything in China, one should ask the question cui bono ? And who benefits is US Global Companies who leave very little in China and therefore generate much higher margins in doing so. The profits are kept offshore in tax havens via the use of IP fees, royalties and transfer pricing. Chins is just the symptom but not the problem. Especially now that Corporate tax rates have been reduced to competitive rates, the quickest way to address the problem would be to change the tax code to tax Corporations on overseas profits as they are declared not when they are repatriated.

In reply to by Duc888

PrivetHedge 38BWD22 Sat, 03/10/2018 - 05:50 Permalink

National security is usually applied to 'security of despotic and incompetent regimes.

What really matters is PERSONAL security: Jobs, healthcare, police who actually make life better, pensions that pay out, savings and investment schemes that work, clean water, clean air, food not contaminated by chemicals etc.

Tarifs help personal security so they must be encouraged.

In reply to by 38BWD22

Abbie Normal 38BWD22 Mon, 03/12/2018 - 19:45 Permalink

Some ideas should not have patent protection.  The Chinese cellphone manufacturers were the first to come out with 5" and 6" phablets and the rest of the world laughed at them.  What if those manufacturers patented the size of the large screen phones?  Then apple would be stuck at 4.7" screens forever.

In reply to by 38BWD22

Lordflin cheka Sat, 03/10/2018 - 08:51 Permalink

Let's brake the back of international trade... we have all the natural resources and talent in this country to be self contained (might even return to mining our own rare earth's, now there's a thought). Bring the military back home... no need to protect over seas interests if we have none... and return our globalists to the street corner with their tin cups (or the gulag, which would be preferable). At that point we have no more use for cheap money, as the money changers are out of business...

Ok, ok... I just woke up, must have been a dream I had...

In reply to by cheka

earleflorida cheka Sat, 03/10/2018 - 11:41 Permalink

last I checked America's aristocracy outsourced all manufacturing and industry starting in the late {(could have been the 1860s for all I know?)}1960s onward hoe...--- [and], right before our eyes without blinders on!  Ah, yes indeed, the american skilled-labor were getting a little too comfy with their livable wage...

first comes slave (were all negroes now?) labor, then the coolie, then machinery, and now robotics, and lastly outsourcing to whom will work the fallow fields of the grand plantations?!?

Indeed, America toss'd aside Republicanism and Liberty for a Monarchial/Despotic British Tory/Nobility model in 1913!, and, we the people, never saw it coming!


GB controlled [all] industrial and manufacturing throughout the entirety of the 19th century. All they had was iron ore/coal and ingenuity--- they however had the greatest commercial maritime shipping fleets in the world, [and] with their colonies on every continent the sun set upon and rose...--- thusly,raw materials were plentiful from the west indies and tropic (Brazil) zone, Australia , India, Egypt, Turkey, China [and] America's dependence on GB humongous cotton trade with our south. GB supplied the world with Rail for railroads, the railroad cars for transportation, the ships & steamships for commercial enterprise and controlled the globes commerce. GB manufactured everything (Textiles [wool, cotton, flax etc.][livestock, grain/ breads, and every foodstuff, alcohol, Iron Work Mills and sundries from a-z, etc., etc.,] without no abundant indigenous natural resources) that their colonies raw materials traded [sold] provided into a finished product making them the financial behemoth of the world.  

How did America fall behind --- the war of 1812 and the civil war were what crushed America's growth during the 19th century[!!!], all created by England's hatred for our (autarky, in which they thought belonged to them since the war of Independence) new found freedom, that started the world on political/social fire...---- this is what seeded revolution now roiling/vacillating the equipoise in Europe from Totalitarianism to Liberty/ Republicanism and a sense of nationalist pride. 

Please realize it was the northern aristocracy in America whom wanted tariffs in the 19th century that destroyed our commerce!?!

And the {British *} US Bank #1[Hamilton] and #2 Bank [Biddle] System (unconstitutional)

In reply to by cheka

AGuy Gaius Frakkin'… Sat, 03/10/2018 - 11:29 Permalink

"Geez, wouldn't that be terrible. No more outsourcing. No more training monkeys what Americans figured out to do."

Not going to happen. The Trade war is likely to increase outsourcing so that US companies can avoid foriegn tariffs when selling goods to Europe, Asia, Latin America, etc. The US isn't the only customer to sell products to.

My guess is that China will block export of critical raw materials, forcing the US to buy finished products from China. China may also work to undermine the Petro dollar so that Oil is no longer traded in Dollars. China will work with the EU and other nations to undermine the US, economically, Politically, Financially.

It is not as if the US will be able to turn around its Manufacturing base anyway. Generation Snowflake, has zero interest in Manufacturing or Trade jobs. They all want cushy office jobs working 35 hours or less a week. The boomers are retiring and Gen-X is too small to carry boomer retirees and Gen-Snowflake.

What is going to happen is costs for everything soar and at lot more job losses as higher costs reduce demand and send more US manufacturers overseas so they can sell good and avoid foriegn tariffs on US goods.

In reply to by Gaius Frakkin'…

pcrs ACP Sat, 03/10/2018 - 02:38 Permalink

This customer with its super markets filled with Chinese goods they pay for with credit. Wouldn't that be a thing if Walmart did not have Chinese goods anymore?

A trade barrier (boycot)  is something you inflict on your enemies. How could it possibly benefit you when you build it around yourself. Wouldn't north Korea have the strongest economy on the world by now? Their industry protected from foreign imports? 

In reply to by ACP

ebworthen Donald J. Trump Fri, 03/09/2018 - 21:29 Permalink

This ^

The Chinese and all the other whiners in Europe and elsewhere already have Tariffs on U.S. exports.

"Trade wars never work!"  Oh S.T.F.U.!  Sure, they never work with free trade.

When has the world ever had free trade!?  Jeebus, so sick of this B.S.

CONgress, the M.I.C., and the Kleptoligarchy sold out the citizen.

Restore individualism and the rights of the citizen.

Anything else is decades of more bullshit.

In reply to by Donald J. Trump

OverTheHedge ebworthen Sat, 03/10/2018 - 03:08 Permalink

Free trade is a lovely idea, when countries of equal sophistication and resources trade between themselves. The EU is a good example of different countries trying to trade on an equal footing, and look at the quagmire of regulations they have to put in place to ensure that everything is "fair", and still it is a mess benefiting Germany above all else.

China and the US are not even close in terms of any metrics: demographics, labour laws, labour costs, environmental costs etc. How can the US compete equally with China? It's costs are far higher, so it's products will cost more to produce. Ergo, China wins. Germany competes well internationally, but in my opinion that is only because the euro takes the edge off their currency - if Germany had the Mark, its exports would stop overnight.

So, if you want the US to manufacture, it has to either subsidise production to compete, or block foreign competition. Free trade on a tilted playing field isn't free: the difficult question is how to level the playing field fairly, so the best product wins. Good luck centrally planning that!

In reply to by ebworthen

swmnguy salad_dressing Fri, 03/09/2018 - 21:33 Permalink

If they outright dump Treasuries, the value goes down.  You don't drive down the value of what you have a lot of.  They'll stop accumulating Treasuries, they'll trade Treasuries, they'll do business in other-than-USD currencies.  They'll keep expanding their trade and influence throughout Asia, the Pacific, Africa, the Middle East, and Europe.  They'll cooperate more closely still with Russia.  

In other words, China will stand pat and let the trend and inertia work for them. 

In reply to by salad_dressing

Implied Violins swmnguy Sat, 03/10/2018 - 00:23 Permalink

They will drop them in a hot minute if other countries start doing it at the same time, so they can get *something* out of them.  In fact, if it is actually the globalist plan to destroy the dollar (and replace it with gold-backed Yuan after an SDR intermediary), then that is *exactly* what will happen.

In reply to by swmnguy

Winston Churchill salad_dressing Sat, 03/10/2018 - 09:53 Permalink

I've said for a long time that I don't think they have any USTs except as the nominal holder anymore,only because that's what I would

done post 2008/9 if I had been them.They pay for OBOR using USTs supposedly but their holdings remain the same.

The PBOC was made a primary dealer, no real reason to do that unless you want to hide something.

Why would you believe any govt. stats at this point ?

We know the TIC report is bogus,just from the KSA holdings,why not all of them.

In reply to by salad_dressing