What was supposed to be a historic, era-defining trade war launched by US President Donald Trump against a range of countries has, for now, narrowed in on a singular target: China. <\/p>\n
On Wednesday, Trump announced a three-month pause on all the \u201creciprocal\u201d tariffs that had gone into effect hours earlier \u2013 with one exception, deepening a confrontation set to dismantle trade between the world\u2019s two largest economies. <\/p>\n
The pace of that escalation has been stunning. Over the course of a week, Trump\u2019s tariffs on Chinese imports have jumped from 54% to 104% and now 125% \u2013 figures that add to existing levies imposed prior to the president\u2019s second term. And China has retaliated in kind, raising additional, retaliatory duties on all US imports to 84%. <\/p>\n
The showdown sets up an historic rupture that will not only cause pain for both of these deeply intertwined economies \u2013 but add tremendous friction to their geopolitical rivalry. <\/p>\n
\u201cThis is probably the strongest indication we\u2019ve seen pushing towards a hard decoupling,\u201d said Nick Marro, principal economist for Asia at the Economist Intelligence Unit, referring to an outcome where the two economies have virtually no trade or mutual investment. <\/p>\n
\u201cIt\u2019s really hard to overstate the expected shocks this is going to have, not just to the Chinese economy itself, but also to the entire global trading landscape,\u201d as well as on the US, he said. <\/p>\n
Trump appeared to link his decision not to grant China the same reprieve as other nations to Beijing\u2019s swift retaliation, telling reporters Wednesday that \u201cChina wants to make a deal, they just don\u2019t know how quite to go about it.\u201d <\/p>\n
But the view from Beijing looks dramatically different. <\/p>\n
Chinese leader Xi Jinping, China\u2019s most powerful leader in decades, sees no option for his country to simply capitulate to what it calls America\u2019s \u201cunilateral bullying.\u201d And he\u2019s playing to his crowd. Publicly, Beijing has drummed up fervent nationalism around its retaliation \u2013 part of a strategy it\u2019s been quietly preparing for more than four years since Trump was last in office. <\/p>\n
While China has long said it wants to talk, Trump\u2019s rapid escalation instead appears to have confirmed for Beijing that the US doesn\u2019t. And in Xi\u2019s calculation, observers say, China is prepared not just to fight back, but to use Trump\u2019s trade turmoil to strengthen its own position. <\/p>\n
\u201cXi has been very clear for a very long time that he expects China will enter a period of protracted struggle with the United States and its allies, that China needed to prepare for that, and they have quite extensively,\u201d said Jacob Gunter, lead economy analyst at Berlin-based think tank MERICS. <\/p>\n
\u201cXi Jinping has accepted that the gauntlet is thrown down, and they are ready to put up a fight.\u201d <\/p>\n
Whether Trump would have suspended his so-called retaliatory tariffs on China alongside other nations had Beijing not moved so swiftly to retaliate remains an open question. Canada had retaliated but was included in the reprieve, which does not remove a 10% universal tariff imposed last week. <\/p>\n
Regardless, Trump, who the White House described earlier this week as having a \u201cspine of steel,\u201d and Xi now appear locked in a war of attrition with the potential to upset a lopsided but highly integrated trade relationship worth roughly half a trillion dollars. <\/p>\n
For decades, China has been the world\u2019s factory floor, where increasingly automated and high-tech production chains churn out everything from household goods and shoes to electronics, raw materials for construction, appliances and solar panels. <\/p>\n
Those factories satisfied the demand of American and global consumers for affordable goods but fueled an enormous trade deficit \u2013 and a feeling among some Americans, including Trump, that globalization has stolen US manufacturing and jobs. <\/p>\n
Trump\u2019s ratcheting up of tariffs to well over 125% could now cut China\u2019s exports to the US by more than half in the coming years, by some estimates. <\/p>\n
Many goods from China won\u2019t be able to be quickly replaced \u2013 driving up US consumer prices, potentially for years, before new factories come online. That could ring up a tax hike for Americans of roughly $860 billion before substitutions, JP Morgan analysts said Wednesday. <\/p>\n
In China, a wide swath of suppliers are likely to see their already narrow margins completely erased, with a new wave of efforts to establish factories in other countries set to begin. <\/p>\n
The scale of the tariffs could lead to \u201cmillions of people becoming unemployed\u201d and a \u201cwave of bankruptcy\u201d across China, according to Victor Shih, director of the University of California San Diego\u2019s 21st Century China Center. Meanwhile, US exports to China could \u201cgo close to zero,\u201d he added. <\/p>\n
\u201cBut China can sustain that (situation) much more so than American politicians can,\u201d he said. <\/p>\n
That\u2019s, in part, because China\u2019s ruling Communist Party leaders do not face swift feedback from voters and opinions polls. <\/p>\n
\u201cDuring Covid they shut down the economy (causing) untold employment, suffering \u2013 no problem.\u201d <\/p>\n
Beijing too believes it can weather the storm. <\/p>\n
\u201cIn response to US tariffs, we are prepared and have strategies. We have engaged in a trade war with the US for eight years, accumulating rich experience in these struggles,\u201d a commentary on the front page of Communist Party mouthpiece People\u2019s Daily said Monday. <\/p>\n
It noted Beijing could take \u201cextraordinary efforts\u201d to boost domestic consumption, which has been persistently weak, and introduce other policy measures to support its economy. \u201cThe plans to respond are well-prepared and ample,\u201d the commentary said. <\/p>\n
And in the face of unknowns about how much further measures could escalate, voices from Beijing appear calm. <\/p>\n
\u201cThe ultimate outcome hinges on who can withstand a longer \u2018economic war of attrition,\u2019\u201d economist Cai Tongjuan of China\u2019s Renmin University wrote in a state media op-ed earlier this week. \u201cAnd China clearly holds a greater advantage in terms of strategic endurance.\u201d <\/p>\n
Beijing in recent weeks has also been talking to countries from Europe to Southeast Asia in a bid to expand trade cooperation \u2013 and one up the US by winning over American allies and partners exasperated by the on-again-off-again trade war. <\/p>\n
But it\u2019s been bracing for US trade frictions since Trump\u2019s first trade war and his campaign against Chinese tech champion Huawei, which were a wake-up call to Beijing that its economic rise could be derailed if it wasn\u2019t prepared. <\/p>\n
\u201cThe Chinese government have been preparing for this day for six years \u2013 they knew this was a possibility,\u201d said Shih in California, who added that Beijing had supported countries to diversify supply chains and looked to manage some of its domestic economic challenges in preparation, among other efforts. <\/p>\n
Today, China is much better placed to weather a broader trade conflict, experts say. Compared with 2018, it\u2019s expanded its trade relations with the rest of the world, reducing the share of US exports from roughly one-fifth of its total to less than 15%. <\/p>\n
Its manufacturers have also set up extensive operations in third countries like Vietnam and Cambodia, in part to take advantage of potentially lower US duties. <\/p>\n
China has also built out its supply chains for rare earths and other critical minerals, upgraded its manufacturing technology with AI and humanoid robots and ramped up its advanced technology capabilities, including semiconductors. Since last year, the government has also worked, with varying success, to address issues like weak consumption and high local government debt. <\/p>\n
\u201c(China\u2019s) weaknesses are significant, but in the context of an all-out brawl, these are manageable. The US is not going to be able to, on its own, bring China\u2019s economy to the edge of destruction,\u201d said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies think tank in the US. <\/p>\n
\u201cAs much as Washington doesn\u2019t want to admit it, when China says you can\u2019t contain China economically, they have a point.\u201d <\/p>\n<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
What was supposed to be a historic, era-defining trade war launched by US President Donald Trump against a range of countries has, for now, narrowed in on a singular target: China. On Wednesday, Trump announced a three-month pause on all the \u201creciprocal\u201d tariffs that had gone into effect hours earlier \u2013 with one exception, deepening…<\/p>\n","protected":false},"author":1,"featured_media":5341,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-5340","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-world-news"],"_links":{"self":[{"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/posts\/5340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/comments?post=5340"}],"version-history":[{"count":0,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/posts\/5340\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/media\/5341"}],"wp:attachment":[{"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/media?parent=5340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/categories?post=5340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/republicanstradetoday.com\/index.php\/wp-json\/wp\/v2\/tags?post=5340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}