China appears to still be weighing how it will respond to sweeping new tariffs on Chinese imports, but Joe Biden told Yahoo Finance that a retaliation is likely coming.
"I don't think it'll lead to any international conflict or anything like that, but I think they'll probably try to figure out how they can raise tariffs, maybe on products that are unrelated," President Biden said in an exclusive Yahoo Finance interview Tuesday.
The president said he expected the coming trade conflict to be manageable, telling Yahoo Finance Executive Editor Brian Sozzi that China is "way over their skis on this."
The stakes for the US are high, Biden added. He says China's goal is to flood markets with cheap government-underwritten goods as an attempt to "put everybody else out of business and then they take over."
Biden's duties announced Tuesday are set to be quickly felt on a specific range of incoming Chinese goods, from electric vehicles to semiconductors to medical products and more.
But experts say any response from China is likely to look very different. That's because the US sends a much different (and not to mention smaller) basket of goods China's way.
"The simple fact is that the Chinese are just not buying much from the United States," notes Ashley Craig, a Washington, D.C.-based international trade lawyer.
But, like the Chinese retaliation that happened during the Trump era, that is likely to mean a few prominent American sectors could feel the pinch most acutely.
That could, for example, mean an impact on makers of machinery: "Caterpillar (CAT) comes to mind," Craig said.
The response is also likely to target farmers looking to sell their crops overseas as well as the makers of other goods like chemicals.
Biden's Republican opponent, former President Donald Trump, responded to Biden's announcement Tuesday outside of his hush money trial in New York, charging that Biden should introduce 100% tariffs on all Chinese vehicles and adding "China is eating our lunch right now."
Asked about Trump's comment Tuesday at the White House, Biden shot back that Trump "has been feeding them for a long time."
What it might look like
For its part, China's Foreign Ministry has already responded multiple times in recent days to Biden's tariffs but offered little in the way of details.
On Tuesday, Foreign Ministry spokesperson Wang Wenbin reiterated to reporters that China opposes the move and "will take all measures necessary to defend our legitimate rights and interests."
Whether that response kicks off a new trade war remains to be seen, but it’s likely to target a few areas that China has focused on in recent years.
The US-China Business Council reports that China was the United States' third-largest goods export market in 2022, with those goods supporting more than 1 million jobs. The top five areas in 2022 were oilseeds and grains, semiconductors and components, oil and gas, pharmaceuticals, and basic chemicals.
In a statement, council president Craig Allen offered that the new tariff package, however targeted, "invites retaliation from China, which combined could further disadvantage US companies selling goods and services in China's market compared to their foreign competitors."
Retaliation is clearly a worry for other Biden officials. Treasury Secretary Janet Yellen offered in a Bloomberg interview on Monday that "hopefully we will not see a significant Chinese response — but that's always a possibility."
In another exclusive Yahoo Finance interview Tuesday, Biden aide Jared Bernstein referenced Yellen's comments but underlined that the targeted nature of the Tuesday's announcement meant that only about 4% of US imports from China would be impacted with new duties.
"I think that in many cases you'll see retaliation proportionate to what you're retaliated against," the head of Biden's Council of Economic Advisers added, saying that worrying about retaliation "can't be the guiding light for this president."
A variety of scenarios
Early estimates from other experts have offered a variety of possibilities for the future.
Tobin Marcus, the head of US policy and politics at Wolfe Research, predicted in a note to clients "some Chinese response, but that Beijing will aim for proportionality, which means the US fallout should be limited."
University of St. Gallen professor Simon Evenett suggested that the 2024 political landscape could impact the response.
"Hitting the battleground states would be tempting," the former World Bank official said in a note to Yahoo Finance.
Evenett also shared how data from Biden's own trade team shows the interconnectedness between China and the states that will decide the next president in November.
For example, Pennsylvania, which may become the key swing state in November, sent China $3 billion in goods such as chemicals, machinery, and food products last year.
Perhaps the area where China's likely response will be most keenly felt is in agriculture, as it was when Trump first levied tariffs in 2018.
The American Soybean Association recently offered that soy growers are "still bruised" by that episode, with China's response one that "essentially halted soy exports to the country overnight."
Craig notes that it could be a similar story this time.
"History is a good indicator," he notes, listing agriculture as an area where China has the ability to impact the US economy and one with political salience in 2024.
But heartland products like US soybeans and beef could again be in China's crosshairs like in 2018, he added, "assuming that the Chinese can supplement and replace as they did in the past."
This post has been updated with additional context.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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