China hasn’t just ramped up the heat on trade and economic policies, but has significantly increased the political pressure in its ongoing response toward the United States. China’s government has recently limited its minerals exports, including rare earths, gallium, and germanium. They put U.S. companies on various blacklists, cutting off those companies’ ability to do business with Chinese firms. All three of these actions represent important steps in strengthening their economic ties with Southeast Asia. As a result, this area has recently become China’s second largest trade partner.
In recent developments, China’s Ministry of Commerce issued a stern warning regarding potential retaliation against countries cooperating with the U.S. in ways that threaten Beijing’s interests. This declaration is a clear message of China’s seriousness to protect its economic interests against U.S.-initiated trade actions.
“China will retaliate against countries that cooperate with the U.S. in ways that compromise Beijing’s interests,” – Chinese Ministry of Commerce
The blacklists defied by China not only preclude U.S. companies from collaborating with domestic Chinese enterprises, but escalate the trade tensions. In response, China played tit for tat, introducing tariffs of up to 125% on U.S. exports. This decision is a significant step in the direction of a more aggressive calculus coming from Beijing.
Additionally, China has filed a lawsuit against the U.S. at the World Trade Organization (WTO) over President Trump’s latest tariff increases, marking a significant escalation in their trade dispute. The war and the resulting fallout have forced China to reevaluate its whole model of international trade, kicking off leadership changes in Beijing to boot. In this light, the recent appointment of Chinese government official Li Chenggang to be its new top international trade negotiator and vice minister is quite revealing. Li has served as China’s ambassador to the WTO, among other top international appointments, so he comes to his new role armed with invaluable experience and expertise.
Seven years ago, in 2015, Chinese President Xi Jinping chose to make his first overseas trip. With escalating tariffs and trade barriers, his trip to Vietnam, Malaysia and Cambodia underscored the vital necessity of regional cooperation. In these visits, Xi called for joint efforts to oppose tariffs and combat “unilateral bullying,” signaling China’s intent to strengthen alliances within Southeast Asia.
Even with these changes, the U.S. is still China’s largest trading partner by single country. Trade dynamics between the two nations have changed substantially as both countries adapt to an ever-challenging domestic and global economic environment.
“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures,” – Chinese Ministry of Commerce