China is prepared to retaliate should President-elect Donald Trump take punitive measures against Chinese goods and trigger a trade war between the world’s two biggest economies, according to people familiar with the matter.
Options include subjecting well-known US companies or ones with large Chinese operations to tax or antitrust probes, said the people, asking not to be identified because the matter isn’t public. Other possible measures include anti-dumping investigations and scaling back government purchases of American products, the people said.
The move illustrates how the fallout from escalating tensions between the two nations risks spreading to companies. Trump has made China a frequent target of his attacks and nominated trade-related officials who the Communist Party’s Global Times newspaper said would form an “iron curtain” of protectionism.
Any retaliation by China against Trump stands to be risky. A backlash may result in China damaging access to its biggest trading partner, said Michael Every, head of financial markets research at Rabobank Group in Hong Kong.
“When you have a country with a large trade deficit that retaliates against a country with a large trade surplus with it, it’s the country with the trade deficit that wins,” said Every. “The country with the surplus loses, every time.”
America’s trade deficit with China narrowed to $31.1 billion from $32.5 billion in October as US exports to the nation were the strongest since December 2013, according to the most recent data available. That brought the trade deficit to $288.78 billion for the 10 months to the end of October.
Full Content: Bloomberg