Tit-for-tat response from Beijing sets the stage for full-blown trade war

Though it was widely expected, China’s decision to impose trade tariffs on US products has triggered concerns that the international trade scene might not be the same anymore. The business world has been abuzz with talks of potential retaliation against the sanctions imposed by President Trump to ‘punish China for breach of intellectual property.’

Meanwhile, the government seems to be well prepared to face any Chinese action on the tariff front; otherwise, the Trump administration would not have brushed aside warnings from the diplomatic circles and business experts.

In the current scenario, in all likelihood, China would look to European countries and Brazil for importing commodities for domestic consumption.

While speculations are rife about Washington’s reaction to the latest development, it is perceived that another round of sanction on Chinese products could derail trade relations between the two economic powers irreversibly. It is to be noted that Trump had warned of more restrictions on products of Chinese origin in the coming days after his historical decision to impose a duty on the import of steel and aluminum.

China might look to Europe and South America for importing commodities for domestic consumption

Now, the prices of scores of products imported from the U.S. will rise sharply in the Chinese market. The 128 products that face sanction, including pork and fruits, are among the top commodities being shipped to China. Interestingly, costlier farm products like soybeans were carefully excluded from the list.

While it is irrational to believe that the American economy would stay unaffected by the Chinese action in the long run, as Washington has claimed in some of its veiled statements, enterprises that rely on the overseas market for their revenues will have to bear the brunt of the tit-for-tat move.

Chinese open to dialogue

Meanwhile, China has made a positive gesture by offering to initiate negotiations to ease the stalemate, giving a ray of hope to all the stakeholders. China seems to be adopting a soft stance, despite Washington’s lukewarm response to its demand for compensation for losses incurred by the U.S. tariffs, which according to Beijing violates the WTO norms.

Naturally, the last thing China would want to do is to add fuel to the tension, especially against the backdrop of Trump hinting at adding more Chinese products to the tariff list soon.