China hits back with tariffs on $50B of U.S. goods

MayCaesar

The matter of fact is that China needs trade with the US much more than the US needs trade with China. For the US, China is probably the most important trading partner, but hardly dominating, and Chinese tariffs will not affect the American economy significantly - American companies will simply transfer business to more favorable Eastern countries, and little income will be lost. On the other hand, if the US hits China hard with tariffs, then China will truly be in a bad state, because a very large fraction of its economy is connected to American investments.

As such, even if the US government keeps expanding the tariffs on the Chinese goods, the Chinese government is unlikely to return the favor and endanger its own economy significantly due to the potential retaliation from the US. 

In addition, Chinese economy in general is very week, compared to the American one. GDP per capita is still barely above the third world level, a large fraction of the property in China is owned by Western (mainly American) private companies, and China simply does not produce many essential goods on its own, relying on the American managers to do so instead. Its economy is in no state to wage trade wars with anyone, let alone with the primary investor and competitor. 

As such, I do not believe that China will take any major action in response to the aggressive economical behavior by the US; at most it will react by criticizing this action in the UN and by expanding trade with other countries offering more favorable trade conditions. Right now the Chinese foreign ministry can threaten all they want, promising a harsh response, hoping to discourage the US from imposing further trade limitations - but I do not think these promises will be acted upon; just like Trump's promises on building a wall at Mexico's expense were nothing more than pandering to his supporters, Xi's bravado is only there to make the Chinese population feel that he is in control of the situation.