What Are Beijing's Best Weapons in the US-China Trade War?

Last week, the Trump administration put a "knife to China's throat" in the two countries' ongoing trade dispute, and yesterday things only got worse.


China announced it would increase tariffs on $60 billion worth of goods imported from the US. Not to be outdone, the Trump administration readied its own fresh tariffs on the remaining $300 billion in Chinese exports not currently subject to increased duties. That's a move that could cut as much as 1.2 percentage points off of China's GDP.

Not surprisingly, all of that pushed markets into another tailspin, over concerns that the trade tussle between the world's two largest economies won't ease up any time soon.

With Trump prepared to really get serious, what else can China do to fight back?

China has already nearly reached the limit of US goods on which it can impose additional tariffs. But there are plenty of other ways that China could grab Trump by the… economy.

Here's how things could really get nasty:

Trade war 2.0: So far, Beijing has declined to place tariffs on certain US goods—like crude oil and Boeing 747s—that are tough for China to replace. But in recent months it has reduced its purchases of US crude and may soon cut back further on other key commodities, like soybeans. China could also instruct its customs officials to give importers of goods produced in the US – such as luxury cars or produce – an extra hard time at the border in ways that are legal in practice but clearly politicized in spirit.

Singling out US companies in China: It could also make life much more difficult for US companies that produce and sell in China. For example, around 40 percent of Apple's sales today come from Greater China, which includes mainland China, Taiwan, and Hong Kong. GM has a joint venture in China, where it sells more vehicles than anywhere else in the world. China could implement new regulations on these companies or move to subsidize their competitors, inflicting pain on some of the titans of America, Inc.

The nuclear option: A more severe step would see Beijing threaten or even move to dump some of its $1.2 trillion holdings of US government debt, a possibility mentioned Monday by the editor of The Global Times, the Communist Party's mouthpiece. That would send US interest rates—the cost the government pays to borrow and finance its spending—soaring and could inflict a major shock on America's financial system more broadly. But by the same token, it could just as easily imperil China's economy, the main reason Beijing hasn't made good on this threat.

China, in sum, has lots of ways it could hurt the US – but each would carry its own risks and blowback. These, for China, are the tradeoffs of a trade war.

Tomorrow, July 20, will mark the 50-year anniversary of the day a human being first stepped onto another world. A moment born out of Cold War political pressures, it's easy to forget a half century later how much bitter controversy the project provoked at home and the intensity of the worldwide fanfare that followed its success.

The moon mission's primary purpose was to defeat the Soviet Union. By the time John Kennedy became president in 1961, the Soviet Union had advanced far ahead of the United States in the race for achievement in space. In October 1957, the Soviets launched Sputnik, the world's first satellite. A month later, a dog named Laika became the first living creature to travel beyond Earth's atmosphere. In April 1961, Soviet cosmonaut Yuri Gagarin orbited the Earth, the first human to do so.

In early May, Alan Shepard became the first American in space, spurring Kennedy to announce a far more ambitious plan. On May 25, Kennedy famously pledged that by the end of the decade Americans would go to the moon and return safely to the Earth.

Kennedy was assassinated in November 1963, but new President Lyndon Johnson quickly signaled his intention to see the promise kept. The Soviets held their space lead through 1965, by landing an unmanned craft on the Moon.

The moon mission stoked controversy in the United States. A review of polls reveals that only in 1969 did a majority of Americans support the project. Many people argued that the billions spent on a moonshot should go toward the war in Vietnam or to fight poverty in America's inner cities. "No hot water, no toilets, no lights. But Whitey's on the moon," sang musician and activist Gil Scott Heron. It didn't help when a fire during the Apollo 1 mission killed three astronauts and destroyed their space module.

But when Neil Armstrong became the first person to step onto the moon on July 20, 1969, the event took on a life of its own. It was a decade framed by two images of respected TV anchorman Walter Cronkite—shaken to the core on air by the 1963 murder of President Kennedy and then speechless with awe as Americans bounded across the surface of the moon.

A decade that included confrontation with the Soviets in Cuba, the assassinations of John Kennedy, Malcolm X, Martin Luther King, and Robert Kennedy, a failing war in Vietnam, race riots in American cities, and violent chaos at the 1968 Democratic Party convention ended with an accomplishment a quarter million miles away, that was watched live by 94 percent of Americans who owned a TV. For perspective: Consider these two images of respected TV anchorman Walter Cronkite—shaken to the core on air by the 1963 murder of President Kennedy and then speechless with awe as Americans bounded across the surface of the moon.

Americans weren't the only ones watching. About 650 million people around the world watched the moon landing live on TV, making the event the first truly global televised event. Nine weeks later, astronauts Neil Armstrong, Buzz Aldrin, and Michael Collins began a world tour.

Concerns that planting an American flag on the moon's surface would seem an act of obnoxious nationalism faded as the three men were greeted by overflow crowds in 27 cities in 24 countries over 39 days. An estimated one million people greeted them in Dhaka (then Pakistan) and some 1.5 million turned out in Mumbai (then Bombay).

Fifty years later, moon missions are still a mark of national prestige. Russia, China, India, the EU, Japan, and Israel have all sent probes to orbit the Moon or landed vehicles on its surface. But none of them matches that first "giant leap for mankind."

Next up: Mars? For thoughts on the next space race, click here.

Bonus fact: Your iPhone has more than 100,000 times the processing power of the computer that landed Apollo 11 on the moon.

This time the field is more crowded with China's growing ambitions throwing US and Russian space dominance into question.

Europe has selected a new president of the European Commission. Last night, German Defense Minister Ursula von der Leyen won support from a majority of members of European Parliament to lead the executive body that shapes policy for the world's largest economic bloc. The final result was a close shave, however — she won by a margin of just nine votes out of 757 — and there's something in the outcome for everyone to hate.

For many anti-EU populists, von der Leyen's appointment confirms their view that the EU is undemocratic and doesn't respect ordinary citizens. Why? Because she wasn't selected by the voters who went to the polls in the recent EU parliamentary elections — or even indirectly by the lawmakers who won those seats. She was hand-picked by leaders of the 28 EU member states, who side-stepped parliament after better-known candidates chosen by various political factions within the legislature failed to attract enough support from the national governments. Anti-EU politicians like France's Marine Le Pen will spend the next five years reminding us that von der Leyen's presidency reflects everything that's wrong with Brussels.

For Angela Merkel, Emmanuel Macron, and other European leaders who backed von der Leyen, her narrow margin of approval gives her a weak mandate as she confronts huge challenges such as the EU's fraught relations with the US and China, showdowns over Italy's budget, erosion of the rule of law in Hungary and Poland, the economic and political fallout of the UK's exit (or not) from the bloc, and the EU's drive to regulate Big Tech.

Von der Leyen herself, who is from the center-right, made significant concessions to get her nomination through with parties that are deeply suspicious of her. Those included a promise to propose a so-called "green deal" within her first 100 days in office, reform the minimum wage, and launch a push for EU-wide legislation on artificial intelligence. Von der Leyen also pledged to reform the process for selecting future candidates for Commission president and to give the EU Parliament a "stronger role in shaping and designing" the EU's future. Now that von der Leyen has secured the closest thing the EU has to a top job, she'll be spending much of her political capital trying to deliver on those promises.