TEMPO.CO, Jakarta – China challenges the United States (US) by declaring its readiness to face an economic dispute if Washington continues to press Beijing. The tension in the China-US relationship has increased during the second term of Donald Trump’s leadership, including the trade war.
Trump has issued various policies that further exacerbate the trade relations between the two countries. This was revealed by the Chinese Embassy in the US as quoted from TASS.
“If the US truly wants to solve the fentanyl issue, then the right thing to do is to consult with China by treating each other equally. If war is what the US wants, whether it be a tariff war, trade war, or any other form of war, we are prepared to fight to the end,” the embassy’s press service wrote on the X platform.
Free trade is often considered the main principle in global economics. However, efforts such as tariffs, subsidies, import quotas, and defense policies are still implemented, even by countries openly supportive of free markets like the United States. When these defense policies trigger retaliatory actions from other countries, disputes arise and can escalate into a trade war.
As quoted from Corporate Finance Institute (CFI), a trade war is an economic conflict between two or more countries that adopt protectionist policies in the form of trade barriers. These barriers can take the form of tariffs, import quota restrictions, and embargoes-prohibition or restriction of trade imposed by one country against another.
The trade restrictions imposed by the US are met with trade policies from China. This phenomenon creates a cycle of retaliation that resembles ‘warring’ in terms of economy.
Illustration of the trade war between the United States and China. Youtube.com
Previously, the spokesperson of the Chinese Ministry of Foreign Affairs, Lin Jian, stated that China is ready to challenge the US in the upcoming trade war. He suggested Washington to choose dialogue, as China is determined to defend its interests until the end.
The reciprocal policy actions between the two countries have led to a trade war, where each party implements various trade restrictions. According to Britannica Money, there are several tools commonly used in a trade war, including:
Tariffs
A country imposes tariffs, which are taxes on imported goods to put pressure on trading partners. This pressure compels businesses to obtain goods from other countries. Just like the heated trade war between the US and China, where the US imposed tariffs on Chinese electronics and China retaliated by taxing US agricultural products, such as soybeans.
Currency Devaluation
Devaluing the currency-government’s effort to weaken the value of a country’s currency-makes exports cheaper and imports more expensive. This strategy is one of the tools commonly used in a trade war. Last year, China was accused of devaluing the yuan to offset the tariffs imposed by the US. However, this strategy risks triggering inflation and disrupting global market stability.
Policies
Aside from tariffs, countries also implement domestic policy strategies to protect their economic interests. Policies include limiting import quotas, providing subsidies to support domestic industries, and regulations to limit foreign competition.
Embargoes and Export Restrictions
An embargo is a tool to halt trade with a specific country to achieve political goals, for example, the 1973 Arab oil embargo against the US. On the other hand, export restrictions are imposed to limit the sale of essential goods, such as technology or raw materials. These measures can disrupt supply chains, weaken the economy, and escalate conflicts like China’s challenge against the US in the trade war.
Sita Planasari contributed to the writing of this article.
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