With Trump conceding in the trade war, it's now China's turn to hold him by the balls

 

Trump has suddenly shown so-called goodwill toward China, offering to reduce tariffs to around 50%. His bargaining chips include not pursuing the origin of the pandemic and claiming smooth progress in negotiations with China, emphasizing his good personal relationship with the Chinese leader and the possibility of quickly reaching an agreement. This haggling approach, akin to small-scale market trading, is utterly simplistic when applied to international trade agreements. The U.S.-China relationship is a comprehensive economic confrontation, with only one victor likely to emerge. China’s response to Trump’s actions is a national strategy, not easily swayed by a few words. Recent moves like selling U.S. Treasury bonds, withdrawing from private equity investments, halting purchases of U.S. agricultural products, rejecting Boeing aircraft, and restricting rare earth exports show that while China’s options may be fewer than the U.S.’s, the pressure these actions create is significant.

After taking office with aggressive rhetoric, threatening China and other nations with heightened punishments, Trump softened his stance in just over ten days, effectively backing down. This not only reveals his lack of credibility but also exposes weaknesses to his adversaries. The U.S.-China trade relationship, which has been mutually beneficial for decades, stems from the U.S. post-Cold War policy of outsourcing manufacturing—first to Japan, then to the Four Asian Tigers, and later to China. China was nurtured by the U.S., and abruptly halting this relationship hurts the U.S. the most. The recent tariff exemptions on products like phones, computers, semiconductors, antibiotics, vitamins, furniture, and auto parts—over a hundred categories—highlight that the U.S. no longer produces these goods domestically, relying heavily on China. Even if imports from other countries are possible, they cannot meet U.S. market demands in the short term, a situation unlikely to change within Trump’s term.

Due to U.S. suppliers stockpiling goods in anticipation of tariff wars, market price reactions are not yet obvious, but public panic-buying has already begun. By July, during the peak summer sales season, shortages and price hikes are expected to hit. The U.S. economy relies 70% on domestic consumption, but with low savings rates and limited disposable income among ordinary Americans, significant price increases will severely impact livelihoods. Biden’s election loss was not due to governance issues but inflation-driven price surges. Trump’s trade war is likely to exacerbate these problems. The trade imbalance lies in the fact that most affordable daily goods used by Americans are supplied by China, irreplaceable in the short term—without Chinese goods, American life would be unsustainable.

The U.S.’s decades-long currency overissuance, which could have triggered severe inflation, has been offset by China’s continuously cheaper exports. In contrast, as an authoritarian state, China can largely ignore domestic economic fallout from trade wars, absorbing losses and, if necessary, reverting to a planned economy, as demonstrated during the three-year pandemic lockdowns. China’s resilience far surpasses that of the U.S., enabling it to endure prolonged economic attrition. For the U.S. to wage a trade war, it must first cultivate a trade partner to replace China and rally international allies to confront China together. Launching a global trade war without such preparation is doomed to fail.

Even if the U.S. softens its stance, China is unlikely to yield and will continue its resistance, imposing conditions such as removing all trade barriers, eliminating all tariffs, lifting export restrictions on high-tech products, and ending semiconductor bans. Without concrete U.S. concessions, the trade war will persist, and China will not engage in substantive negotiations. China may even demand an apology from Trump and a commitment to permanently abandon trade wars. By doing so, China could emerge, with U.S. acquiescence, as a defender of global trade, leading a “community of shared human destiny” and establishing itself as an international leader surpassing the U.S., bolstering its global image through the trade war.

Trump, eager for quick results, is likely to react impulsively to China’s indifference, escalating not just tariffs but other forms of pressure. However, faced with China’s resolute defiance, he will likely back down, as seen in his failed 24-hour Russia-Ukraine mediation. Trump’s second term has two apparent goals: to disrupt the U.S. for his family’s financial gain and to help Russia escape its predicament. His real estate empire, funded by Russian money, has survived multiple near-bankruptcies thanks to rubles. His first election was supported by Russia, orchestrated by Putin to defeat Hillary Clinton, aimed at alleviating Russia’s isolation from the Ukraine border conflict. Now, with Russia facing defeat, Putin has reactivated Trump as a strategic asset. The tariff trade war is a facade to distract from aiding Russia, with the real goal of shifting focus from Russian affairs. This explains Trump’s sudden demand for Ukraine to cede Crimea and the four eastern regions, lift all sanctions on Russia, and his threat to withdraw from mediation if Russia doesn’t comply. While the world fixates on the trade war, Russian issues fade into the background. Notably, Russia is among the few countries exempted from heavy tariffs, with even African nations and Pacific islands facing higher tariffs.

The U.S. is unlikely to fully withdraw from mediation, but its capacity is limited. Having alienated much of the world, Trump may struggle to fulfill Putin’s tasks. With Europe independently supporting Ukraine in the Russia-Ukraine war and China’s unrelenting stance in the trade war, Trump’s actions continue to undermine U.S. national interests. Each time he proclaims America’s greatness, the U.S. edges closer to decline, teetering on the brink of an abyss.