China Doesn’t Want to Play by the World’s Rules

U.S. President Donald Trump’s most recent threat to target all $505 billion in annual Chinese imports to the United States is only the latest development in the looming U.S.-China trade war. While Trump and his team are preparing for an economic competition focused largely on tariffs, policymakers must prepare for a multi-domain competition rooted in Chinese political posturing, domestic propaganda, and economic coercion targeting American firms operating in China. These unconventional challenges will demand a comprehensive U.S. response.

Many Americans agree that solving the distorted U.S.-China economic relationship is critical. But the answer isn’t to be found in trade alone. The root of this problem is not the deficit, but China’s deeply held belief that it is not beholden to the same rules as other nations.

In the trade war, the U.S. toolbox remains limited in comparison to what China’s state-directed economy can wield. Trump remains politically constrained by a Congress understandably eager to roll back his tariffs on U.S. allies, and he is fighting pushback from the U.S. private sector, keen to protect its investment in China at all costs. In contrast, Chinese President Xi Jinping sits at the top of an authoritarian system that enables him to implement policy virtually unchecked. The vast reach of the CCP’s apparatus can be used to support behavior that falls outside of World Trade Organization norms, such as boycott measures, baseless customs restrictions, and export bans, in the pursuit of victory.

To date, China has responded to U.S. tariffs dollar for dollar. The pending round of $200 billion in additional tariffs will be challenging for China to match, given the trade imbalance. Chinese officials have publicly stated that they intend to take “qualitative” measures in response to U.S. tariffs. If these measures look anything like China’s past actions targeting South Korea’s Lotte Mart stores, Japan’s rare earth minerals, and Norwegian salmon, we should anticipate massive state-enabled economic coercion targeting U.S. private-sector interests operating in China.

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