If China wants to beat Trump’s tariffs, change must come from within

The re-election of Donald Trump to the US presidency could further strain an already tense Sino-US relationship. It was the president-elect’s disapproval of existing trade rules that led to escalating tariffs and sanctions on China and, together with retaliatory responses from Beijing, sparked the trade war in 2018.

Those frictions have since expanded to technology, investment and financial areas, resulting in progressive “decoupling” of the world’s two largest economies.

Trump has a deep affection for tariffs, which he once called “the most beautiful word in the dictionary”, and he could intensify their use to fulfil many of his campaign promises. He believes tariffs can help narrow the US trade deficit, bring back manufacturing jobs and pay for the hefty tax cuts he promised voters.

US tariffs of 60 per cent on Chinese products, plus levies of 10 to 20 per cent on all other imports, could weaken a global trade system already showing signs of stagnation. Worse, the likely tit-for-tat responses from major trading partners could exacerbate the damage of a new trade war beyond what was experienced in 2018-19, leaving no winners.