Why US sanctions threats against China aren’t credible

The US talking up economic war on Iran reflects the reality that it is running out of ammunition for a hot war. The US has imposed economic and financial sanctions on Iran for decades. Now it aims to impose secondary sanctions on Iran’s trading partners. As China is Iran’s main trading partner, the US is essentially targeting China.

China and the US have traded places since US President Donald Trump initiated the trade and tech war during his first term. At the time, China was grappling with a massive property bubble and a bloated shadow banking system. The government managed to deflate both without triggering a major economic downturn. Today, while China’s growth rate is muted, the economy is resilient and can withstand shocks.

The US’ financial fragility and China’s resilience make it unlikely that the former will initiate an action that can shock its financial system. In a game of chicken, the US will blink first.

The US has been sanctioning China in trade and technology through any means it can find. So far, China has been able to absorb the blows without suffering a recession. China is in the crosshairs of US politicians, with or without Iran. Hence, China has no incentive to respond to US pressure on additional sanctions.