The Wall Street Journal reports:

In the years since President Trump’s first trade war with China, Beijing has built an arsenal of tools to hit the U.S. where it hurts. Now, it is getting ready to deploy them in full.

China is increasing tariffs on all U.S. imports to 84%, a response to new U.S. tariffs on Chinese imports of 104% that went into effect at midnight Wednesday. It also added six U.S. companies including defense and aerospace-related firms Shield AI and Sierra Nevada to a trade blacklist, and imposed export controls on a dozen American companies including manufacturer American Photonics and BRINC Drones.

The broad set of countermeasures appeared to have further provoked Trump, who on Wednesday moved to pause higher tariffs on dozens of countries but singled out China for an even bigger tariff hit. Trump said he would raise China duties to 125%, effectively immediately. Washington and Beijing are now heading toward a full-blown economic warfare.

While Trump has focused on tariffs as his trade weapon of choice, China’s strategy goes well beyond imposing its own levies, relying on the lure of the Chinese market for U.S. companies. A central thread running through its calculus is how to inflict hardship on companies that bank on their ties with the world’s second-largest economy.

Tools that Beijing has already used and is likely to expand include export controls of critical materials American companies use to make chips and defense-related products, regulatory investigations designed to intimidate and penalize U.S. companies, and blacklists intended to bar U.S. businesses from selling to China. In addition, authorities are preparing new ways to pressure American companies to give up their crown jewels—intellectual property—or lose access to the Chinese market. [Continue reading…]