MAD about Sino-American trade

SINGAPORE (Oct 1): Now that US President Donald Trump has imposed a 10% tariff on yet another US$200 billion ($272.8 billion) worth of Chinese imports, the US-China trade war has entered a costly new phase. As China follows through on its pledge to retaliate, the casualties will include more than half the bilateral trade between the two countries, with China itself suffering the most losses.

Whereas China exported US$506 billion worth of merchandise to the US in 2017, it imported just US$130 billion of American goods. That means that, in a dollar-for-dollar slugging match, China will quickly run out of steam. Lacking powerful counterpunches, China now has some of its most creative political minds searching for novel means of retaliation.

One idea, in particular, has attracted a lot of attention in the press, mostly because it comes from Lou Jiwei, a former minister of finance who now heads the National Council for Social Security Fund, China’s national pension fund. In a defiant speech delivered at the high-profile China Development Forum on Sept 16, he proposed withholding exports of goods that US companies need, thereby severely disrupting US supply chains for three to five years, at least. Such a manoeuvre, Lou mused aloud, would be economically painful enough to influence US elections.

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