Why China does not use its consumer power in the trade war, yet - Victor Shih

Victor Shih

The developing trade war between China and the US focuses on tariffs for commodities, while China could hurt the US really nasty by deploying its consumer power by boycotting products, tourism, and US-related education. Political analyst Victor Shih, author of Factions and Finance in China: Elite Conflict and Inflation, explains in Bloomberg why China has not done so.

Bloomberg:

The lack of consumer boycotts is “a bit unusual, but consistent with the Chinese rhetoric that China would be a defender of the global trading order,” Victor Shih, an associate professor and expert on China at the University of California, San Diego, said. “The reality is that the status quo allows China to protect many of its industries, so China wants to maintain the status quo.” 

Don’t count on that forbearance continuing if tensions escalate. In all, Chinese subsidiaries of U.S. companies had about $223 billion in revenue in 2015, according to Deutsche Bank AG. Reduce those sales by just 20 percent – a rather modest target, given what consumer boycotts did to Korean firms last year – and you’ve already done $45 billion in damage, more than equivalent to the 10 percent tariff the U.S. is threatening to levy on a further $400 billion of imports if Beijing doesn’t back down.

More in Bloomberg.

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