Economic Watch: China Locked and Loaded as Trade Tensions Escalate

In face of trade tensions increasingly stirred up by the United States, China has ample trade weapons loaded to return fire and protect its own interests whenever necessary, officials and economists have said.

Tension between the world's two largest economies reached a new height after the U.S. side threatened additional duties on Chinese goods worth 100 billion U.S. dollars Thursday. China, hours later, said it will "fight till the end at any cost" and take "comprehensive countermeasures."

This has been the third round of trade fire exchange between the two economic giants, all of which were initiated by the U.S. side.

In the first two rounds, the United States slapped tariff on steel and aluminum imports from countries including China, as well as additional tariffs on Chinese imports worth 50 billion U.S. dollars, to which China responded firmly with tariff plans of equal weight.

For the latest U.S. protectionist move, China also demonstrated full readiness to fight back "fiercely" with detailed countermeasures in the pipeline.

"We don't want a trade war, but we are not afraid of it," said China's Ministry of Commerce (MOC) Friday.

Though details of the possible options were yet to be revealed, the country has hinted that all options are possible regarding the escalating situation.

"We are not taking any options off the table," Gao Feng, spokesperson with the MOC, said at a press briefing Friday.

He Weiwen, an executive council member of the China Society for World Trade Organization Studies, said China still has many cards still up in its sleeve.

Petroleum and liquid natural gas could be the possible options for future tariff hike if trade tension mounts, as China is the largest regional buyer of these U.S. products, according to him.

As the world's second largest economy, China should not be threatened by the United States, he said, noting that China's countermeasures of equal scale will produce equal effect on the United States.

In the previous trade fire exchange, U.S. products such as soybeans, automobiles, aircraft and chemical products have already been on the list of China's reciprocative tariff plan.

"I have to say that we were forced to take countermeasures, and we have reacted with restraint," Vice Minister of Commerce Wang Shouwen told reporters.

Wang Xiaosong, a professor with Renmin University, said China's announced countermeasures have already hit the United States' tender spot, as U.S. products like soybean and aircraft are highly dependent on the Chinese market.

U.S. soybeans sold to China account for 62 percent of its total soybean exports, with 32.85 million tonnes of soybeans exported to China in 2017, or 34.39 percent of China's total imports.

"With all the domestic industries united as one, China is stronger in economic resilience," Wang said. If trade tension escalates, China still has plenty of countermeasures at disposal and room for maneuver.

Meanwhile, simulation calculations have shown that the U.S. trade bashing will not be a threat on China, and China is fully capable of bearing the consequences brought by a trade war, according to Li Chunding, an associate research fellow at the Chinese Academy of Social Sciences.

Vice Finance Minister Zhu Guangyao also reiterated earlier that China will not surrender to external pressure.

"Looking at it another way, external pressure is the driving force for innovation and development," Zhu said.

China will continue reform and opening up, safeguard multilateral trade, and promote global trade and investment liberalization and facilitation, the commerce ministry has pledged.