China Suggests It Will Support Its Companies Against Tariffs

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Among the advantages of a nation with a central government controlled by one ruling party is that local organizations can be shielded from forces from outside the country. China appears to have made that arrangement as it helps buttress companies and industries that may be hurt by U.S. tariffs.

In the state-controlled Global Times, editors wrote:

Trade frictions between China and the US continue to escalate. Now, it’s time for China to take further self-defense measures including offering fair subsidies for the companies and industries that may suffer great losses due to unfair actions taken by the US.

The ongoing trade tensions are now spilling over into the technology sector as media reports said US President Donald Trump plans to bar Chinese companies from investing in key technologies in the US. Although Peter Navarro, one of Trump’s top trade advisors, was quoted by US business channel CNBC as saying that there “were no plans to impose investment restrictions,” we cannot rule out the possibility that Chinese technology companies may still be treated unfairly and thus become the victims of Trump’s trade war.

The editors go on to say that China does not want a trade war, but one may be coming nevertheless. And the process of defending Chinese businesses has a second goal, which is to move away from low-cost labor-related businesses to those that require technology as their foundations.

The government’s comments show how it will use a double-barreled approach to combat the United States. First, it will do something the U.S. government will not, which is to give direct support to threatened industries. Recently, a U.S. nail company, Mid-Continent Nail, threatened to close as the Trump administration’s tariffs will raise its cost of goods. Harley-Davidson has claimed that tariffs will force it to move production overseas. Unlike the Chinese plan, neither of these companies nor their industries will receive protection from the federal government. They may languish on their own.

The Chinese plan to support its own companies runs against the rules of capitalism. It may, however, be protection that U.S. companies won’t get.