China’s Retaliation Could Move Beyond Tariffs

“What China can do is go back to other things they've done in the past: thicken the border,” he explains. ( MGN Online )

As the trade spat continues between the U.S. and China the stakes are getting higher and higher. Last week President Trump upped the ante by increasing tariffs on $250 billion worth of goods. The Chinese government countered with additional tariffs on $60 billion worth of goods. Still, some economists say Chinese retaliation could move beyond tariffs. 

“China has done some tariffs. But you know, since they send us so much more in goods by value than we send them, they've kind of run out of things to do just by putting tariffs on new products,” David Salmonsen, senior director of congressional relations for the American Farm Bureau Federation, told AgDay host Clinton Griffiths. “The U.S. still can do a lot more on this.”

So instead of retaliating with tariffs, Salmonsen said the Chinese government could choose to inflict pain on U.S. businesses operating in China in other ways. 

“What China can do is go back to other things they've done in the past: thicken the border,” he explains. As a state-dominated and heavily regulated economy the government has lots of tools in the toolbox to disrupt business, including withholding licenses, new taxes, and more inspections. 

“Things like that slow trade down, make it more difficult to do business,” Salmonsen said adding that in the past China has also called for boycotts of products made by countries they don’t like. “So these are things that we would be concerned about, which would also interrupt our trade with China.”

Other concerns include a slowdown of customs clearances, delayed visa applications and the use of safety rules to choke business, according to trade analysts. Additionally, U.S. treasuries continue to rise to the top as a concern. China holds a lot of U.S. bonds, $1.13 trillion worth as of February 2019, and should they sell them, economists say that could cause a ripple effect in the U.S. economy. Still, Salmonsen said it’s not likely to happen because doing so would be a form of self-sabotage. 

“That's an issue that comes up but they're so invested in that, one would think it would also hurt them,” he said. “They would do that more as a bit of a showpiece to show they could do it but I most people think that's not something that would really follow very far.” 

Still other analysts believe China selling their bonds and investing in the Eu or Japan would be positive for the U.S. 

It would “push down the value of the U.S. dollar and actually help the U.S. out a little bit on trade balances,” Roger Tutterow, an economics professor at Kennesaw State University told FOX Business network

"If China were to stop purchasing ...or dump treasuries back on the market and treasury yields went up, then investors from other countries would be more likely to flow in," he told FOX Business. “The U.S. Treasury, even at current levels, provides a pretty good risk-return trade-off.”