China is preparing to retaliate against any new tariffs if Donald Trump launches another trade war when he returns to the Oval Office next year, with analysts saying Beijing has had time to develop tools that could prove useful in an economic tit-for-tat.

Trump’s promises to impose further tariffs due to what he says are China’s unfair trading practices could hardly come at a worse time for Beijing: Exports are one of the few bright spots in the world’s second-largest economy, which is already slowing and is unlikely to hit this year’s 5 percent growth target.

China will strike back in the first rounds of another Trump trade war to build negotiating leverage, said Wang Yiwei, an international affairs expert at Beijing’s Renmin University.

“China definitely will retaliate,” he said. “We need to hit to let Trump know, if you do this, the cost may be higher in other ways.” While Trump’s approach to China policy remains unpredictable, the president-elect vowed to slap 60 percent duties on all Chinese goods, in addition to the measures he imposed in his first term, which were largely kept in place by President Joe Biden.

Biden and Chinese leader Xi Jinping are set to hold their final meeting in Peru on Saturday, after the Asia-Pacific Economic Cooperation forum in Lima, before Biden hands over power to Trump on Jan. 20.

Another trade war will have serious consequences for China, but Beijing won’t be caught unawares in a second Trump era, analysts said.

“This time, I think the government is better prepared,” said Yuan Mei, an international trade expert at Singapore Management University.

Trump’s sweeping tariffs would hit an economically weak China

Further economic pressure isn’t on Beijing’s wish list right now.

China is struggling to contain a spiraling property market crisis, while many young people are unemployed and local governments across the country are burdened by mountains of debt.

Chinese policymakers in September began unveiling a cascade of measures to try to inject momentum into the economy, including a $1.4 trillion program announced last week to help cash-strapped local governments.

Even as the domestic economy is flailing, China’s exports have surged in recent months, providing a glimmer of hope amid a dim economic picture.

Trump’s proposed tariffs threaten to put a damper on that hope.

“Trade conflict could open a new, external front of economic problems when policymakers are already struggling,” said Meg Rithmire, a professor at Harvard Business School who focuses on China’s political economy.

This isn’t Trump’s first trade war with China

Trump launched a trade war against China in 2018, during his first term as president, when he imposed billions of dollars in tariffs on Chinese goods to change what he saw as China’s unfair practices such as intellectual property theft. Escalation ensued, with China retaliating with billions in tariffs on U.S. goods.

These tensions exacted a painful price, especially for China. The trade war cost China $35 billion and the United States $15 billion during 2018 and 2019, according to research by Yang Zhou, an economist at Shanghai’s Fudan University.

In 2020, the final year of Trump’s first term, the two countries signed a “phase one” trade deal that included a commitment from China to buy an additional $200 billion in American goods over two years. Beijing didn’t fulfill its side of the bargain: China purchased less than 60 percent of the U.S. imports it committed to buy, according to the Peterson Institute for International Economics.

When Biden came into power in 2021, his administration kept the tariffs in place - even increasing levies on goods such as electric vehicles, solar panels and steel.

China is now on track to record a $1 trillion trade surplus with the United States - meaning that its exports far outpace its imports - a development that is likely to fan the flames of Trump’s tariff fever.

Beijing has more tools to fight back this time

In the first trade war, China quickly retaliated with $100 billion in tariffs on U.S. goods, particularly agricultural products like soybeans and corn.

To retaliate against any new measures, China would probably turn back to this agricultural tariff playbook, in part because it targets the livelihoods of U.S. farmers, a politically important constituency for Trump in swing states like Ohio and Iowa.

“If what happens in the first couple of years of the Trump administration really disrupts the business of farming, you can imagine the U.S. midterm elections going a different direction,” said Even Pay, an agricultural analyst at Trivium China, a Beijing-based research firm.

Cost-of-living pressures are already on many Americans’ minds, and concerns about the economy helped propel Trump to victory earlier this month, so pushing up food prices could put pressure on the American president, Pay said.

Beijing has also been experimenting with new tools - including sanctions and export control powers - which could prove useful in an economic tit-for-tat. These tools use China’s dominance over many global supply chains to its advantage.

For example, Beijing barred Chinese firms from supplying parts to Skydio, a U.S. drone maker, because the company sells its drones in Taiwan. The action disrupted its battery supply, Skydio said last month. In 2021, Chinese lawmakers also passed a law to bar Chinese firms from complying with foreign sanctions.

Last year, China’s Ministry of Commerce announced it was placing export controls on gallium and germanium, two minerals that are used to produce semiconductors and solar panels, limiting supplies available internationally.

American consumers would see higher prices

Trump’s tariff plan would probably be a drag on American pocketbooks. If Trump follows through on a 60 percent duty on Chinese goods, as well as a 20 percent blanket tariff on goods from other countries, it would cost a typical middle-income U.S. household more than $2,600 annually, according to analysis from the Petersen Institute.

Mei of Singapore Management University said that cutting China out of global supply chains will be painful for companies all across the world. “You might expect that some countries would benefit,” he said. “But that’s not the full picture, again, because today’s trade is so integrated.”

Trade tensions may further Xi’s self-sufficiency agenda

One of Xi’s core policy goals over the past four years has been to transform China into a self-sufficient behemoth that isn’t heavily dependent on foreign countries for cutting-edge technologies or agricultural products.

Trade tensions would be more manageable because of China’s self-reliance drive, but they may also help Xi’s independence agenda.

“Decoupling maybe is not so dangerous for China, it makes China more independent,” said Wang of Renmin University, referring to the separation of the U.S. and Chinese economies. “Short term, of course, it’s a huge challenge. Long term, I think China is still a big market … and the world factory and we have strong Communist Party leadership.”

China has been diversifying its export markets so it’s not reliant on the United States. Over the past decade, Chinese exports to Southeast Asia and Latin America have risen by more than three-quarters.

China has also developed other sources for agricultural products. China’s soybean imports from Brazil, for example, increased by over 140 percent from 2015 to 2023, according to official statistics.

“Going into a second Trump administration, Beijing now can feel confident to push back harder,” said Pay of Trivium China. “Because they know exactly where their food is coming from and it’s no longer over-reliant on the U.S.”

Another trade deal?

Trump could enact tariffs as a way to bring Beijing to the negotiating table.

But it’s not yet clear what the contours of such a deal would be, partly because the precise goal of the tariffs is hazy, said Harvard’s Rithmire. “Are they to extract concessions from China, and on what? Are they to diversify U.S. imports to reduce reliance on China?” she said.

The prospect of future trade negotiations, combined with Trump’s desire to be seen as a global dealmaker, is leading to some optimism in Beijing’s foreign policy circles.

“Fundamentally, his true color is a businessman, so businessmen know how to do business,” said Wang Huiyao, founder of the Center for China and Globalization, a think tank in Beijing. “China actually likes to talk business.”

Pei-Lin Wu in Kaohsiung, Taiwan, contributed to this report.