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This trade war is unlikely to resemble World War I, when the opposing powers threw everything they had into the initial weeks of combat. It is more likely to resemble World War II, when the “phony war,” or Sitzkrieg, went on for more than a year before Germany invaded France, reported Asia Times (Thailand).
China’s response to the Trump tariffs is limited, and understandably so. Its position is paradoxical: at the same time that it imposed retaliatory tariffs on US goods, it is trying to restore US exports of Qualcomm handset chips to ZTE, which just fired its top management to comply with an expected agreement with the Trump Administration.
If China wanted to hurt the US economy, it has been widely observed, it would encourage Chinese consumers to shun US goods sold in China, from Apple to Starbucks. It has done nothing of the sort. A possible exception is the Chinese court ruling in favor of United Microeletronics Corporation against Micron, which led to the ban of certain Micron chips.
Instead, China will prepare for a more intensive trade war by securing its access to key technologies, especially semiconductors. Handset chips are the most obvious case in point after the ZTE affair.
It will take China a year and a half by the best-informed estimates to establish an alternative supply chain, presuming a virtually unlimited R&D budget and continued cooperation from Taiwan and South Korea, the main providers of semiconductors to China.
Huawei for example powers some of its top of the line handsets with the Kirin chipset. The chips are made by Taiwan Semiconductor. Beijing would have to be confident that Taiwan would support an alternative supply chain in the event of a full-scale trade war with the United States.
What we have not seen, and will not see any time soon, is
1: Chinese government calls for consumers to boycott US brands;
2: Competitive devaluation of the RMB;
3: Politically-motivated sales of US Treasuries; and
4: More aggressive military moves in the South China Sea.
What we will see (and may have to look hard to see) is
1: A crash program to replace key high-tech components with domestic substitutes;
2: Quiet efforts to increase the use of the RMB as a trading currency;
3: Continued deleveraging of financial institutions to buttress China’s banking system against prospective shocks; and
4: Subtle military pressure on Taiwan and South Korea.
China will want to gauge President Trump’s intentions before deciding on future action, while securing its position in the event of a trade war escalation.
show source http://www.atimes.com/article/trade-sitzkrieg-not-blitzkrieg/