Share on facebook
Share on twitter
Share on telegram
Share on whatsapp
Share on linkedin
Share on print
Share on email

Geopolitics Watch: Will Xi Really Strike Back at the US in Trade Clash?

◎ Xi is posturing for the moment, but future action depends on U.S. action.

In a meeting with about 20 American and European CEOs of multinationals on June 21, Chinese leader Xi Jinping appeared to indicate that China would retaliate to the Trump administration’s recent escalation of trade tensions, according to The Wall Street Journal.

“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek. In our culture we punch back,” Xi said, according to the report.

The Journal also cited a senior Chinese official as saying: “China is not going to yield to outside pressure and eat the bitter fruit. That’s the negotiation principle set by President Xi.”

The backdrop:
Xi and the senior official’s remarks follow a decision by the Trump administration to impose additional tariffs on up to $400 billion worth of Chinese goods. The additional tariffs are a response to China raising $50 billion of tariffs to match the $50 billion that the United States announced on June 15. The first $50 billion of tariffs is split into two lists of items, the first of which ($34 billion) would go into effect on July 6.

“This latest action by China clearly indicates its determination to keep the United States at a permanent and unfair disadvantage,” President Donald Trump said in a statement on June 18. “This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States.”

From May to early June, U.S. and Chinese officials held several rounds of talks to resolve the trade dispute after the Trump administration first announced tariffs in April. The U.S. tariffs are aimed at cutting its massive trade deficit with China, getting China to change its unfair methods of acquiring American intellectual property and technology, and protecting national security. Concurrently, the Trump administration is pursuing initiatives to curb the Chinese regime’s “Made in China 2025” plan to become a global technology leader.

Our take:
1. China and the U.S. would likely seek opportunities for last-ditch negotiations before the first round of U.S. tariffs are levied on July 6.

According to Bloomberg, officials at the U.S. National Economic Council are reaching out to China experts and former U.S. government officials to weigh the chances for bilateral talks in the next fortnight, and are even considering inviting Chinese vice president Wang Qishan to negotiate.

We previously wrote that China would not be able to withstand a trade war with the U.S. A worsening economy and rising social tensions in China in recent weeks have made delaying a full-blown trade clash more imperative for the Xi Jinping administration. It is unlikely that China is not finding ways to restart trade talks before the tariffs deadline. And should both sides get a chance to talk, Xi needs bargaining chips to negotiate a favorable deal.

In this context, Xi’s talk of wanting to “punch back” against the U.S. and the unyielding attitude from the senior Chinese official are attempts at tough posturing before further trade discussions.

2. Regardless of whether Xi actually plans to “punch back,” he and other Chinese officials have to publicly present a hard-nosed attitude as per the political culture of the Chinese Communist Party (CCP). Propaganda is a crucial means for the CCP and other communist regimes to ensure regime survival. Authoritarians can never openly admit defeat even if defeat is a reality, and regime propaganda would say anything to spin defeat into victory to save face.

The North Korean regime is a case in point. Weeks before the June 12 summit between North Korean leader Kim Jong Un and President Donald Trump, North Korean officials and state media condemned U.S-South Korean military drills and remarks by U.S. National Security Advisor John Bolton using classic North Korean propaganda rhetoric. Yet it was clear (at least to us) that Kim was sincere about denuclearizing as early as March. In his first meeting with Xi Jinping in March, Kim said that he is committed to the denuclearization of the Korean Peninsula according to the “wishes of General Secretary Kim Jong Il,” his late father, according to Xinhua. In April, Kim announced that North Korea would cease nuclear and missile testing and instead focus on economic development. And in the lead up to Kim’s meeting with Trump in Singapore, the North Korean regime removed all its anti-American propaganda posters in Pyongyang and ceased selling anti-American trinkets in tourists shops. State media also ceased direct criticisms of Trump after he agreed to a summit with Kim in March. In Singapore, Kim and Trump signed a joint declaration where the former “reaffirmed his firm and unwavering commitment to complete denuclearization.” Despite having made concessions, Pyongyang never once publicly conceded that U.S. “maximum pressure” had brought it to the negotiating table where it basically agreed to surrender its nukes and shutting down its nuclear program.

A similar situation is happening with the Chinese regime. For all of the CCP’s macho rhetoric on trade, it appears to be quietly reining in its anti-American propaganda for fear of escalating the trade conflict. According to recent information from mainland China, state media organs have been instructed to stop mentioning the “Made in China 2025” plan, refrain from attacking Trump, and not carry reporting that would ratchet up trade tensions. Reuters also reported on June 25 that Beijing is “downplaying Made in China 2025” because it is “increasingly mindful that its rollout of the ambitious plan has triggered U.S. backlash.” Meanwhile, the Chinese State Council has been announcing plans for economic opening up, and Hainan Province even announced that it would allow tourists to circumvent the Great Firewall and access foreign news and social media websites (Hainan’s plan has since been taken down from its website and reporting on it has been scrubbed).

3. We believe that Xi and China’s response to Trump’s threat to impose tariffs of up to $450 billion worth of Chinese goods hinges on subsequent U.S. action.

Commerce Secretary Wilbur Ross said in a Senate Finance hearing on June 20 that the Trump administration has to put on “maximum pressure” if the U.S. is to have any hope of fixing the “big questions” of IP abuse and unfair trade practices. If Trump stays the course, the Chinese regime would unlikely escalate the trade conflict beyond the tariffs of $50 billion and would instead hasten the opening up its economy. Expect Xi and CCP propaganda to sell the opening up as a self-initiated “national strategy” and not a concession to American pressure.

If the Trump administration backs down, however, Beijing would likely “punch back” strongly. American businesses in China could even be targeted with fines, investigations, and other inconveniences.

Search past entries by date
“The breadth of SinoInsider’s insights—from economics through the military to governance, all underpinned by unparalleled reporting on the people in charge—is stunning. In my over fifty years of in-depth reading on the PRC, unclassified and classified, SinoInsider is in a class all by itself.”
James Newman, Former U.S. Navy cryptologist
“Unique insights are available frequently from the reports of Sinoinsider.”
Michael Pillsbury, Senior Fellow for China Strategy, The Heritage Foundation
“Thank you for your information and analysis. Very useful.”
Prof. Ravni Thakur, University of Delhi, India
“SinoInsider’s research has helped me with investing in or getting out of Chinese companies.”
Charles Nelson, Managing Director, Murdock Capital Partners
“I value SinoInsider because of its always brilliant articles touching on, to name just a few, CCP history, current trends, and factional politics. Its concise and incisive analysis — absent the cliches that dominate China policy discussions in DC and U.S. corporate boardrooms — also represents a major contribution to the history of our era by clearly defining the threat the CCP poses to American peace and prosperity and global stability. I am grateful to SinoInsider — long may it thrive!”
Lee Smith, Author and journalist
“Your publication insights tremendously help us complete our regular analysis on in-depth issues of major importance. ”
Ms. Nicoleta Buracinschi, Embassy of Romania to the People’s Republic of China
"I’m a very happy, satisfied subscriber to your service and all the deep information it provides to increase our understanding. SinoInsider is profoundly helping to alter the public landscape when it comes to the PRC."
James Newman, Former U.S. Navy cryptologist
“Prof. Ming’s information about the Sino-U.S. trade war is invaluable for us in Taiwan’s technology industry. Our company basically acted on Prof. Ming’s predictions and enlarged our scale and enriched our product lines. That allowed us to deal capably with larger orders from China in 2019. ”
Mr. Chiu, Realtek R&D Center
“I am following China’s growing involvement in the Middle East, seeking to gain a better understanding of China itself and the impact of domestic constraints on its foreign policy. I have found SinoInsider quite helpful in expanding my knowledge and enriching my understanding of the issues at stake.”
Ehud Yaari, Lafer International Fellow, The Washington Institute
“SinoInsider’s research on the CCP examines every detail in great depth and is a very valuable reference. Foreign researchers will find SinoInsider’s research helpful in understanding what is really going on with the CCP and China. ”
Baterdene, Researcher, The National Institute for Security Studies (Mongolian)
“The forecasts of Prof. Chu-cheng Ming and the SinoInsider team are an invaluable resource in guiding our news reporting direction and anticipating the next moves of the Chinese and Hong Kong governments.”
Chan Miu-ling, Radio Television Hong Kong China Team Deputy Leader
“SinoInsider always publishes interesting and provocative work on Chinese elite politics. It is very worthwhile to follow the work of SinoInsider to get their take on factional struggles in particular.”
Lee Jones, Reader in International Politics, Queen Mary University of London
“[SinoInsider has] been very useful in my class on American foreign policy because it contradicts the widely accepted argument that the U.S. should work cooperatively with China. And the whole point of the course is to expose students to conflicting approaches to contemporary major problems.”
Roy Licklider, Adjunct Professor of Political Science, Columbia University
“As a China-based journalist, SinoInsider is to me a very reliable source of information to understand deeply how the CCP works and learn more about the factional struggle and challenges that Xi Jinping may face. ”
Sebastien Ricci, AFP correspondent for China & Mongolia
“SinoInsider offers an interesting perspective on the Sino-U.S. trade war and North Korea. Their predictions are often accurate, which is definitely very helpful.”
Sebastien Ricci, AFP correspondent for China & Mongolia
“I have found SinoInsider to provide much greater depth and breadth of coverage with regard to developments in China. The subtlety of the descriptions of China's policy/political processes is absent from traditional media channels.”
John Lipsky, Peter G. Peterson Distinguished Scholar, Kissinger Center for Global Affairs
“My teaching at Cambridge and policy analysis for the UK audience have been informed by insights from your analyzes. ”
Dr Kun-Chin Lin, University Lecturer in Politics,
Deputy Director of the Centre for Geopolitics, Cambridge University
" SinoInsider's in-depth and nuanced analysis of Party dynamics is an excellent template to train future Sinologists with a clear understanding that what happens in the Party matters."
Stephen Nagy, Senior Associate Professor, International Christian University
“ I find Sinoinsider particularly helpful in instructing students about the complexities of Chinese politics and what elite competition means for the future of the US-China relationship.”
Howard Sanborn, Professor, Virginia Military Institute
“SinoInsider has been one of my most useful (and enjoyable) resources”
James Newman, Former U.S. Navy cryptologist
“Professor Ming and his team’s analyses of current affairs are very far-sighted and directionally accurate. In the present media environment where it is harder to distinguish between real and fake information, SinoInsider’s professional perspectives are much needed to make sense of a perilous and unpredictable world. ”
Liu Cheng-chuan, Professor Emeritus, National Chiayi University