Trump and Xi shake hands in front of their respective national flags Trump and Xi shake hands in front of their respective national flags (AP photo)

TAIPEI (Taiwan News) – Although the China-U.S. trade war is only just starting, China is running out of cards to play, according to a report by Japanese newspaper Sankei Shimbun on August 6.

The report argues that China cannot match the scale of U.S. tariffs, and is left without many other options.

Last week, the U.S. announced that it will raise the tariff rate on US$200 billion (NT$18.36 trillion) worth of Chinese imports from 10 percent to 25 percent. In response, China announced that it will slap a 25 percent tariff on US$60 billion worth of U.S. imports.

The report points to the disparity in imports, and argues that because the U.S. imports more Chinese goods, it has more scope to hurt China. While China imports around US$150 billion in U.S. goods, the U.S. imports US$505 billion in Chinese goods. This structural difference makes it increasingly difficult for China to continue slapping the U.S. with sanctions.

Sankei Shimbun therefore suggests that China has only two other plays; boycotting U.S. goods and liquidation of Chinese-held U.S. Treasury bonds.

After South Korea agreed in July 2016 to set up the U.S. missile defense system Terminal High Altitude Area Defense (Thaad), China began its boycott of everything South Korean. Korean car sales in China halved, and supermarkets closed. Chinese tourism to South Korea also decreased by 70 percent within one year, reported the Financial Times of London.

Such boycotts could be possible for U.S. goods and companies. Chinese state media recently said that U.S. tech giant Apple could be used as a "bargaining chip," reported CNBC.

Sankei Shimbun suggests that if China wanted to go to the extreme, it could liquidate its US$1.18 trillion in U.S. Treasury bonds. This could significantly disrupt the U.S. financial system, but will also trigger instability in China. The U.S. President also has mandate under the Emergency Economic Powers Act (IEEPA) to nullify ownership of government bonds by foreign governments.

Although the Chinese government underwrites a great swathe of U.S. debt, its usefulness in the trade war is dubious.

All this suggests according to Sankei Shimbun that China has limited potential retaliatory actions, leaving China with few cards to play.