No winners in trade wars, says Chinese envoy, as U.S. confrontation looms

By Liz Lee, Laurie Chen, Ryan Woo

BEIJING (Reuters) -There are no winners in tariff or trade wars, nor in wars over science and technology or industry, said China’s top envoy to the United States, as Donald Trump’s presidential election win raised the spectre of another bruising confrontation with China.

Xie Feng, China’s ambassador to the United States, said differences between the two nations should be the driving force for exchanges and mutual learning rather than “an excuse for rejection and confrontation”, and that the successes of each were opportunities for the other.

Speaking at a dinner hosted by the U.S.-China Business Council in Shanghai on Thursday, Xie did not directly address the U.S. election or Trump, who previously heaped tariffs on billions of dollars of Chinese goods before agreeing to a truce in January 2020.

In 2019, China’s economy grew a revised 6.0%, the weakest in nearly 30 years, weighed down by trade war with the U.S. The economy has further cooled since, with the government targeting a modest expansion of around 5.0% in 2024, putting it on the back foot if there are fresh trade frictions after Trump takes office in January.

The Republican has vowed to adopt blanket 60% tariffs on U.S. imports of Chinese goods compared with the 7.5% to 25% levied in his first term.

Reminding the United States of the presence of U.S. companies, Xie said about 60% of the new stores opened by McDonald’s Corp (NYSE:) in the past year were in China, while Shanghai is the only major city in the world with more than 1,000 Starbucks (NASDAQ:) cafes.

“The more success stories of mutually beneficial cooperation, the better,” Xie said.

“China and the United States can achieve many great and good things through cooperation, and the list of cooperation should be stretched longer and longer.”

But any attempt to contain or suppress China would only “hit a wall”, Xie said.

Analysts said China would be ready to fight back if a new trade war were to erupt.

“Even in the unlikely event that we saw a sudden thaw in U.S.-China ties, Beijing will continue to prioritise self-sufficiency and economic security,” said Joe Mazur, senior analyst at Beijing-based consultancy Trivium China.

“If (tariffs) were to happen, I think we would start to see some pretty aggressive retaliation from the Chinese side. The calculus here would likely be that playing nice really didn’t get China anywhere and that striking back hard might cause the U.S. to think twice about pressuring China economically.” 

Julian Evans-Pritchard, Head of China Economics at Capital Economics, wrote in a note on Thursday: “We estimate that the direct impact of even a 60% U.S. tariff on goods from China would be well under 1% of China’s GDP.”