As trade relations between the US and China deteriorate, the risk of an economic war characterized by escalation of retaliatory measures and a shift to asymmetric tactics is growing, China analyst Sari Arho Havren said in an interview with PAP.
After the White House announced on Thursday another tariff increase on imports from China to 145 percent, Beijing responded by increasing tariffs on US products from 84 to 125 percent. At the same time, the Chinese Ministry of Finance assured on Friday that further increases from Washington will be “ignored”, but that China will “fight to the end”.
Havren, an expert at the Royal United Service Institute (RUSI), a think tank dealing with defense and security, when asked about the PRC's potential next response to the U.S. tariffs, noted that Beijing has a wide range of options available.
“In addition to tariffs, China has already implemented non-tariff measures to exert economic pressure,” Havren noted, citing examples such as placing U.S. companies on export control lists, restricting the eligibility of certain U.S. goods and announcing restrictions on Hollywood films. She also suggested that China could target the services trade sector, where the U.S. has long had a surplus, and launch more intellectual property and cybersecurity investigations into U.S. companies doing business in China.
“I expect China will increasingly pursue asymmetric measures beyond trade,” Havren said, noting the fentanyl smuggling situation as an example where cooperation could be curtailed or halted. She also predicts further investment restrictions, tougher enforcement of environmental and labor protocols by U.S. companies in China, and a strategic campaign to undermine the U.S. as a reliable global partner.
As for the future of U.S.-China trade relations, Havren outlined three potential scenarios. The first and “most likely” is “a prolonged economic war with continued escalation.” Neither side seems willing to compromise, she said, with both governments prioritizing national resilience and economic sovereignty.
In her opinion, the leader of the PRC “Xi Jinping is unlikely to talk to (US President Donald) Trump, that's not how the Chinese operate. They like to build things from the bottom up.” This scenario would lead to a decrease in trade volume, a drop in investment, negative GDP growth in both countries and disruptions in the global supply chain.
The second scenario involves “targeted negotiations on overlapping sectors,” such as agriculture and technology. While Havren sees that as a possibility, she considers it less likely. “Both economies rely on some overlapping sectors, such as agriculture and technology, and through mediation, a sectoral agreement could be reached,” she said.
Finally, Havren described a “real-world ‘decoupling’ scenario,” the disconnection of the world’s two largest economies, that could last a decade or more. It reflects ideological incompatibilities, an erosion of trust and a focus on “national resilience.”
“This would have an impact on long-term and massive readjustment of global trading systems, higher costs, polarization between the US and China trading blocs, global tensions. But also local opportunities and reindustrialization in many areas,” the PAP interviewee assessed.
Referring to the Beijing government’s emphasis on technological independence and self-reliance, the expert admitted that this policy has yielded mixed results. “Under Xi Jinping’s leadership, China has been actively building resilience and implementing risk mitigation policies. China has strategically diversified its supply chains to reduce its dependence on any single economy,” Havren said.
Although China has emerged as a leader in sectors such as artificial intelligence and renewable energy, “Chinese companies still rely heavily on imports in the semiconductor sector.”
Despite efforts to increase domestic consumption, which is the biggest pain point of the communist authorities of the People's Republic of China, demand remains weak and the potential for redirecting some products adapted to American or European markets is limited, and this “limits China's ability to fully offset declining exports to the US,” the expert emphasizes.
From Beijing Krzysztof Pawliszak (PAP)
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