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China Briefing
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Wang Xiangwei
Wang Xiangwei

China Briefing | China’s solution to Trump’s trade tantrums? Treat him like a natural disaster

  • Last week’s decision to devalue the yuan against the dollar sent turbulence through international markets
  • But Washington should be aware that Beijing knows exactly what it is doing – particularly when it comes to matching Trump’s brinkmanship, writes Wang Xiangwei

Reading Time:4 minutes
Why you can trust SCMP
US President Donald Trump at a ‘Make America Great Again’ campaign rally in Ohio. Photo: AFP
Wang Xiangwei
After fighting a trade war with the United States for more than a year, Chinese officials have long realised that the best precaution against Donald Trump’s presidency of wilful unpredictability is to liken it to a natural disaster. While it is hard to predict when or how a disaster strikes, one should think of all possible ways to prepare for the worst and mitigate risks in case it happens.
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As a result, few would have been surprised when Trump once again ramped up trade tensions with China and announced plans to impose a 10 per cent tariff on an additional US$300 billion worth of Chinese imports on September 1. That would be on top of US$250 billion of Chinese imports to which the US has already applied tariffs, and would basically cover all Chinese goods imported into the US.

His announcement came just one day after Chinese and American trade negotiators concluded their 12th round of talks in Shanghai to defuse the trade tensions, and promised to meet again for discussions in September.

In an apparent move to signal its displeasure and hardening stance, Beijing on August 5 allowed the yuan to weaken past the psychologically significant level of seven to the dollar, its lowest point in 11 years. At the same time, Beijing also ordered Chinese companies to halt purchases of US agricultural goods.

The two moves indicated that Beijing would not cave to the demands from Washington. Within hours Trump reacted and directed his Treasury Department to label China a currency manipulator, even though the move is largely symbolic and has more of a psychological effect for the short term.

Still, the prospect that the trade war could expand into a currency war has roiled international markets – including a sharp sell-off on Wall Street on August 5, the biggest percentage drop of the year.

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