Who will win in an economic war of attrition?

Beijing, which feels backed up against the wall due to the increasingly intense tariff attack by the United States on China and all countries that buy or assemble Chinese goods, is preparing for an economic war of attrition, according to world media.

Washington last week imposed import tariffs of at least 10% on almost the entire world, with significantly higher levies on countries like Vietnam, where Chinese factories are relocating production. That prompted a Chinese counter-move, followed by new threats of escalation from US President Donald Trump.

“Whoever gives in first will be the victim,” a Chinese policy adviser told Reuters, speaking on condition of anonymity. “It’s about who can hold out longer.”

Faced with Trump's threat to impose additional 50 percent tariffs on Chinese goods unless Beijing withdraws its countermeasures on American imports, Chinese leader Xi Jinping remains defiant. His Commerce Ministry on Tuesday accused the United States of "blackmail" and said China was ready to "fight to the end."

However, as the New York Times points out, behind that defiance lies a more complex reality for President Xi, which makes both political and economic concessions to the country's largest trading partner and main rival in the fight for global influence almost impossible. With Trump showing no intention of giving in either, a devastating trade war between the world's two largest economies may be inevitable, a conflict with painful consequences that will be felt around the world, the Times estimates.

The problem for Xi is that he must not show weakness, and retaliatory strikes carry the risk of further escalation. The Chinese leader has presented himself as a national savior, which gives Beijing less room to retreat in a conflict with Washington, which could undermine Xi's political legitimacy.

China, however, does not have many good options. It will try to turn to other markets in Asia, Europe and the rest of the world, but that is unlikely to be the way out of the problem. Other countries have much smaller markets than the US, and their economies are already suffering the consequences of tariffs. Many are also wary of importing cheap Chinese goods.

The European Union, as reported by the Politico portal, turned to Beijing on Tuesday for help in monitoring the wave of Chinese imports that are expected to flow into the EU after Trump further tightened tariffs on Chinese goods.

President Xi has long warned that China's rise is unlikely to go unchallenged by the West, and has invested heavily in bolstering China's self-reliance, the Times recalls. This week, as stock markets around the world plunged, Beijing mobilized state-owned banks and investment firms, known in China as the "national team," to ramp up purchases of Chinese stocks and halt further market slide. Chinese stocks rose slightly yesterday, after a sharp drop on Monday.

Additional subsidies, export tax refunds or other incentive measures are possible, but this also carries the risk of exacerbating the problem of industrial surpluses and further encouraging price declines.

China's countermeasures, such as its own tariffs and export controls, are unlikely to have much effect, given that China exports almost three times as much goods to the United States as it imports from it - about $160 billion. But if Beijing believes it can withstand more pressure than Washington, it may be its only option.

"China cannot inflict as much damage on the United States as it receives, because it has a large trade surplus, and if we exclude rare metals, it has even more to lose by imposing export restrictions," Arthur Kroeber, director of research at Gavekal, told Reuters.

"But that's no longer the point. The signal Beijing is sending with its moves is that it will oppose American attempts at dominance and is prepared to engage in a war of economic attrition."

Part of China's strategy is to exploit the chaotic fallout from Trump's tariffs to try to pull the rest of the world out of America's orbit of influence.

Xi is reportedly planning to visit Southeast Asian countries, including Vietnam, next week. Beijing has tried to present a united front with Japan and South Korea against Trump's tariffs, although officials in Tokyo and Seoul, which rely on the United States for security, have distanced themselves from China's stance.

On the same day that Trump announced the new tariffs, the Chinese Foreign Ministry posted a video on social media portraying the US as a source of harm and instability, while on the other side it showed scenes of Chinese peacekeepers and rescue teams pulling survivors from the rubble after the recent earthquake in Myanmar.

“There is no doubt that Beijing is skillfully exploiting this moment,” Danny Russell, a diplomacy and security analyst at the Asia Foundation’s Institute for Asia Policy in Washington, told The Times. “But Beijing is torn,” Russell added. “Its instinct is not to interrupt its adversary while he is making a mistake, but at the same time it is deeply concerned that that mistake could bring down the global economy, and China with it.”

As Washington and Beijing try to inflict as much damage as possible on each other, and the rest of the world suffers as collateral damage in their trade war, it is hard to imagine what some grand de-escalation deal would look like.

Economists believe that Trump's goal of balancing trade with China is unachievable in the short and medium term, given that one side is the world's leading producer, while the other is the largest consumer.

If a quick agreement remains out of reach, everything could turn into a battle of political wills in which, according to some analysts, Beijing has the upper hand.

Reuters recalls that thousands of demonstrators gathered over the weekend in Washington and other cities across the US to protest against Trump, who is also facing harsh criticism from Wall Street for the turmoil in global markets caused by his tariffs.

A Reuters/Ipsos poll showed that 57 percent of Americans oppose the new tariffs, while 73 percent of respondents said they expect prices in the US to rise.

Even tech billionaire Elon Musk, who previously said the impact of Trump's tariffs on cars was "significant" for his company Tesla, made a direct but unsuccessful appeal to Trump over the weekend to lift the import tariffs, the Washington Post reported. This is the most open sign of disagreement between Trump and Musk yet, according to the newspaper.

Xi is unlikely to encounter similar resistance in a country whose political system is tightly controlled, and he can, if necessary, prepare both monetary and fiscal stimulus for later in the year to ease any social tensions.

"Ultimately, it all comes down to which country is able to manage its own population more effectively to cushion the economic fallout of this trade war," Jiwu Chen, a finance professor at the University of Hong Kong's Business School, told Reuters.

“Trump, or at least Republican politicians, is certainly facing a lot of pressure, and the American media is still quite free,” he added. “That’s why I don’t think Trump has much political ability to deal with China in this conflict.”