China’s Strategic Responses to the US Trade War: Key Economic Countermeasures

The ongoing trade war between the United States and China has seen both economic superpowers deploying a variety of strategies to protect their interests.

While the US has increased tariffs on Chinese imports, China has responded with a series of countermeasures designed to impact American consumers, businesses, and policymakers. These tactics aim not only to mitigate the effects of US tariffs but also to exert pressure on key sectors of the American economy.

1. Increased Costs for US Consumers

One of the most immediate effects of the trade war is the rising cost of goods in the United States. China remains the world’s largest manufacturer of essential products, including electronics, toys, and clothing. As tariffs drive up prices, American consumers are likely to face higher costs, particularly in industries that rely heavily on imports from China.

Although President Trump has argued that the trade war could encourage US manufacturing, the process of shifting supply chains is costly and time-consuming. In the meantime, price increases could weigh on household budgets and slow economic growth.

2. Pressure on US Farmers and Exporters

China has historically been a major buyer of American agricultural products, including soybeans, corn, and pork. During previous rounds of the trade war, US farmers suffered heavy losses as China shifted its purchases to suppliers like Brazil.

In response, the US government provided billions in aid to farmers. However, continued trade restrictions could further hurt American agricultural exports, impacting not only farmers but also the broader economy, particularly in rural states that play a key role in US elections.

3. Targeting Specific US Companies

China has also taken steps to target individual American corporations by restricting their access to the Chinese market. Recent actions include:

• Adding US companies to an “unreliable entity list,” limiting their ability to operate in China.

• Investigating American firms for alleged violations of Chinese regulations.

• Restricting exports from China to US firms in sensitive industries such as aerospace and semiconductors.

Since many major American companies, including Apple and Tesla, rely on China for both production and sales, these measures could have significant financial consequences.

4. Controlling Rare Earth Mineral Supplies

China dominates the global supply of rare earth minerals, which are essential for the production of electronics, military equipment, and green energy technology. By limiting exports, China could disrupt supply chains and increase costs for US manufacturers.

While the US is working to develop alternative sources for these minerals, China’s near-monopoly in this sector provides it with strong leverage in trade negotiations.

5. Selling US Treasury Bonds

China is one of the largest holders of US Treasury bonds, with holdings of over $700 billion. While selling off a significant portion of these assets could destabilize global markets, it remains a potential tool for applying economic pressure.

Although most analysts believe Beijing is unlikely to take such a drastic step due to the risks involved, the mere possibility of China reducing its bond holdings adds another layer of uncertainty to financial markets.

6. Currency Adjustments

China has previously devalued its currency to make its exports more competitive on the global market. A weaker yuan would offset some of the impact of US tariffs, allowing Chinese manufacturers to maintain their price advantage.

While Beijing has stated its intention to keep the yuan stable, currency adjustments remain a potential tool in China’s economic strategy.

7. Reducing Access to Chinese Entertainment Markets

China is one of the largest international markets for Hollywood films, sports leagues, and entertainment companies. In the past, Beijing has limited access to US entertainment content as a way of signaling political displeasure.

If trade tensions continue to escalate, further restrictions on American entertainment companies could hurt major studios and sports organizations that depend on Chinese audiences.

With input from Axios and the New York Times.