Former Chinese Finance Minister Lou Jiwei has speculated that China could retaliate to US tariffs by hitting their high-value-added manufacturing sector, Caixin reports, cutting off supply lines of intermediate materials to US producers.
Speaking at the China Development Forum Special Session in Beijing, Lou, currently the chair of the National Council for Social Security Fund, said China had many options on how to effectively fight back against the US. The high-tech manufacturing goods he mentioned were excluded from Washington’s latest round of tariffs, granting relief to major US firms such as Apple and Microsoft.
Lou added that the US, in turn, could begin to form supply chains with other countries in the region to replace China, but this process will take years to implement.
He also pointed out that the effects of the trade war will depend on the strength of China’s domestic demand, the key driver of the country’s monumental growth in recent decades. China’s current account surplus only made for 1.4% of its GDP, so its contraction in 2017 and into 2018 may not significantly hinder growth, said Lou.