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Why China Will Hit Back Super Hard Against Trump Tariffs, According to One Nobel-Winning Economist

March 23, 2018, 10:41 AM UTC

China can’t be seen to be weak on trade against a ‘bully’ like U.S. President Donald Trump because appeasement will lead to more and more demands, said Nobel prize-winning economist Joseph Stiglitz.

“Particularly when you have a bully like Trump, it would not be good to respond in a weak way,” said Stiglitz in an interview with Bloomberg Television in Beijing. “We know about appeasement from Munich. It’s a different kind of a war but in a trade war appeasement could lead to more and more demands.”

Trump Thursday instructed U.S. Trade Representative Robert Lighthizer to levy tariffs on at least $50 billion in Chinese imports. China responded today to the earlier Trump levies on steel and aluminum with tariffs on about $3 billion of imports from the U.S., and said it has a “comprehensive plan” in place for the second salvo.

But Stiglitz, a Columbia University economics professor, said China is anyway in a better position to withstand the storm than Trump should a full-blown trade war unfold. That’s because it has the tools and resources to help those adversely affected by the fallout from a trade war while the U.S. does not, he said.

“It’s sitting on $3 trillion of reserves that it can use to help those adversely affected,” he said. “In the United States we don’t have an economic framework that is able to respond to the particular places that will be affected by a trade war. The fiscal resources of the United States are strained.”