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Chinese leader Xi Jinping has warned the United States against restarting a trade war, saying there would be “no winners” even as he vowed to defend the country’s economic interests.
Xi made the remarks on Tuesday during a meeting with the heads of several global financial institutions, including the World Bank and International Monetary Fund, a day after Chinese regulators announced an antitrust investigation into American chip maker Nvidia.
The probe is widely seen as a major escalation in a growing battle for AI dominance, which both Washington and Beijing believe is crucial to safeguarding national security, even before Donald Trump returns to the White House.
“Tariff wars, trade wars, and technology wars go against the historical trend and economic laws, and there will be no winners,” Xi said according to state broadcaster CCTV.
“Building ‘small courtyards with high walls’ and ‘decoupling and breaking chains’ will hurt others and not benefit oneself. China has always believed that only when China is good can the world be good. Only when the world is good can China be better,” he added.
US National Security Advisor Jake Sullivan has used the “small yard and high fence” phrase to describe a strategy of allowing most trade with China to progress normally while placing restrictions on some goods, particularly high-tech products like semiconductors, deemed to have military applications.
Last week, the Biden administration announced a third round of export curbs in as many years restricting Beijing’s access to two dozen types of semiconductor-making equipment and advanced memory chips, as well as placing controls on more than 100 Chinese companies.
Trump said last month China will face higher tariffs on its goods, by 10% above any existing tariffs, until it prevents the flow of illegal drugs into the US.
In an interview that aired Sunday on NBC, the incoming president said he and Xi had been “communicating with each other” a few days previously. When asked about the discussion at a regular briefing on Monday, a spokesperson for China’s Foreign Ministry did not directly confirm or deny it.
China is relying on exports, particularly to major trading partners like the United States, as a key engine of growth as domestic demand slumps because of a number of economic problems. On Tuesday, official data showed that exports fell sharply, and imports unexpectedly shrank last month.
Exports grew by just 6.7% in November. It was noticeably weaker than the 8.5% forecast by a group of economists polled by Reuters and much lower than an increase of 12.7% in October.
“We doubt this marks an end to China’s recent export boom,” Zichun Huang of Capital Economics wrote in a research note. “Although US tariffs could reduce export volumes by around 3%, they may not be felt until the middle of next year. In the meantime, the threat of tariffs may even spur exports as US firms ramp up orders in anticipation.”
The need to prepare for “external shocks” was cited in Monday’s readout of a meeting by the Communist Party’s powerful Politburo, which made headlines by announcing it would adopt a “moderately loose” monetary policy next year. Economists said the wording meant monetary policy, which involves influencing interest rates, was being relaxed for the first time since 2010.
“It is likely that China would continue to improve trade relations through lower export tax rebate and clearer rules including government procurement,” Citi economists wrote on Monday.
