China is armed and ready for trade war 2.0 with Donald Trump

In the summer of 2018, when former President Donald Trump launched a trade war with Beijing, the Chinese economy was gaining on the United States, and popular opinion suggested it could soon become the world’s largest. Now, with Trump months away from retaking office, China’s economy has been greatly diminished. Contending with a property, debt and deflation crisis, China doesn’t look ready for another fight.

In the summer of 2018, when former President Donald Trump launched a trade war with Beijing, the Chinese economy was riding high. There was even talk it could soon overtake the United States as the world’s largest. Now, with Trump months away from retaking office, what had appeared to be a juggernaut has been greatly diminished. Contending with property, debt and deflation challenges, China doesn’t look ready for another fight. But appearances can be deceiving. Armed with an understanding about the way the president-elect operates, the Chinese leadership is better equipped to deal with the real possibility of Trump making good on his promise to impose upwards of 60% tariffs on goods sold to the United States, according to economists and analysts, through a combination of trade diversification, targeted retaliation against US companies and support for domestic consumption. “China has been preparing for this day for quite some time. The US is much less important to its trade network (than it was before),” said Dexter Roberts, author of the Trade War newsletter and a senior fellow at the Atlantic Council. In part because of the first trade war which continued under President Joe Biden, Beijing, as well as Chinese companies, have already started actively reducing its trade dependence on the United States. The impact is visible in trade data and has come at warp speed.