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Will China hit Hollywood and N.Korea diplomacy in US trade war?

As China looks beyond tit-for-tat tariffs in the looming trade war with the US, other products like Starbucks coffee could begin to face restrictions
AFP

Beijing (AFP) – China may look beyond tit-for-tat tariffs in the looming trade war with the United States, analysts say, with a range of creative options at its disposal, including targeting Hollywood films or dragging its feet on North Korea.

Fears of a debilitating trade war between the United States and China are rising after US President Trump said up to $450 billion in Chinese goods — nearly all of its exports to the US — could be in the firing line for higher taxes.

Beijing immediately responded, calling Trump’s threat “blackmail” and warning it could hit back with “strong countermeasures combining quantitative and qualitative measures”.

But with only $130 billion of imports from the US last year, how would China hit back?

Why is Beijing retaliating?

“Retaliation has to be done, if you don’t retaliate you lose even more, so that’s why you have a trade war,” said Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace who has discussed the trade tensions with top Chinese officials.

Other countries have learned from Japan’s experience, Huang said, alluding to the Asian giant’s historical trade tensions with the US, which cooled off only after Tokyo accepted quotas on exports to the US, reduced its import tariffs and allowed its currency to appreciate.

“Japan lost 20 years,” Huang said, referring to the country’s two decades of no growth. “You both lose, but if you don’t do that, only you lose.”

Beyond tariffs: how else can China hit US products?

The iPhone X, Buick Excelle car, Starbucks’ double mocha macchiato and tickets to see Tom Cruise’s summer action flick are all hot sellers in China.

They could all become subject to restrictions should tensions snowball into an all-out trade war with the US, analysts say.

Beijing has shown to other countries that it can use wide-ranging tactics to mete out economic punishment.

Last year, when geopolitical frictions with Seoul ratcheted up, South Korea’s conglomerate Lotte saw scores of its 120-plus outlets in China shut down, ostensibly over “safety issues”, while angry protesters demonstrated in front of others.

China’s hordes of tourists, usually hungry for the South’s cosmetics, stopped arriving in Seoul as Beijing banned group tours.

Some US businesses are already getting hit: China last month said it had stepped up inspections of key US imports such as pork and automobiles –- stranding them in ports -– because of “problems”.

“China still has plenty of weapons to use once it runs out of quantitative measures,” economist Andrew Polk said in a newsletter.

Could Beijing end cooperation on North Korea?

Punishing UN sanctions on North Korea — approved and enforced by Beijing — drove Pyongyang to the negotiating table, analysts say, landing Trump his made-for-TV summit with Kim Jong Un in Singapore earlier this month. 

To achieve the North’s complete denuclearisation, Trump likely needs Beijing to stay on board with the sanctions, but a trade war could change Chinese thinking, said Cheng Xiaohe, an international relations professor at Renmin University. 

Cooperation between China and the United States on the North “will become very complicated and very difficult,” Cheng said.

In an indication of China’s leverage on the issue, Kim visited Beijing exactly one week after the summit to brief President Xi Jinping, his third trip to China this year.

How will the trade spat play out?

Huang, the economist, outlined three stages of a trade war, from prices rising, to imports and exports shifting countries, to firms moving production and investment.

During the final stage, a prolonged trade war will be “affecting the growth rate by significant margins” and lead to a collapse of global trade, Huang said.

“Tensions are not going to go away. Probably going to get worse before they get better,” he said.

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