Stephen Joske is the director of the China regional forecasting service at the Economist Intelligence Unit in Beijing. He looks at the options open to China if the US passes a punitive trade bill.
Could the Chinese authorities offer subsidies to their manufacturers to offset the tariffs?
It's possible, but so far what has been done is retaliatory measures in which China puts a tariff on US imports. Subsidies are a difficult one. It implies a breakdown of WTO [World Trade Organization] rules if you do wholesale subsidies. It can be quite expensive and you're locking yourself into potentially open-ended government spending.
Would the tariffs have a big effect on US consumer prices?
China is such a major exporter at the low end, and the low end of the middle range as well, so it should have a major effect.
Would tariffs on Chinese goods encourage manufacturing to move away from China into other low-cost countries?
That's certainly the case. The process is already in train, because labour costs in China are rising. Manufacturers are moving to cheaper areas within China and moving to a whole range of locations including Bangladesh, India and Mauritius.
Is it likely that the EU, also a major importer of Chinese goods, would also impose tariffs?
At the moment probably not, although it might put some domestic political pressure on them. Both the US and the EU face the same pressures, and both have resisted heavy-handed tariffs so far. The main issue in the EU is that the country that's faced the biggest problems has been Italy with textiles.
Do you think the US will end up imposing tariffs on Chinese goods?
The general feeling is that [the US president Barack] Obama will veto anything that's damaging. The plans themselves are damaging, but they're unlikely to be imposed in that form.
* Daniel Bardsley
