There is little doubt that China would retaliate against any protectionist measures directed at it by the US. In this report we highlight 10 areas where China could strike back.
Soybeans, grains and aircraft would likely be the most in scope as this could hurt Trump in politically important areas. US consumer goods in China could also suffer as a result of a potential (mild) consumer boycott.
China could sell US treasuries, but we do not expect this to be the first line of defence as it would also hurt China and could lead to financial instability globally.
While we expect China to retaliate against any protectionist measures from Trump, we believe it would tread carefully and not strike back too hard.
Our baseline scenario is not a large-scale trade war. However, the risk remains as long as there are further trade measures looming.
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