The world’s leading geopolitical powers, the United States and China, are embroiled in a trade war that is rapidly escalating and has the potential to cause immense harm to both countries as well as shockwaves across the globe.
Given that President Trump has initiated this possible disaster, one may reasonably wonder if he has a plan and what his vision is for the future.
Typical Trump, always winging it. This week, he shockingly increased tariffs on China without following any sensible formula. Just like a real estate shark, he’s ramping up the stakes to an unbearable degree in order to gain leverage. The “madman theory,” by which Trump summons the worst possible scenario in an effort to intimidate his opponents, has taken yet another form.
Maybe it will be successful, and China will hurry to the table, unwilling to damage an economy that is no longer producing jaw-dropping growth figures. Even more so than Trump, many China specialists think Beijing is reluctant to go all the way. Both parties may feel they have no choice but to retreat if a full-scale trade war were to ensue.
However, Chinese President Xi Jinping retaliated by increasing tariffs on US products entering China to 125% in response to Trump’s latest attempt to up the ante on Thursday by confirming levies on Chinese goods will now reach 145%. China was “not afraid,” according to Xi.
Furthermore, further evidence emerged that Trump’s administration fails to recognize the Beijing-based variables that influence China’s valuations. A person familiar with the negotiations told HEADLINESFOREVER’s Kylie Atwood that the administration had quietly advised Xi not to react to US tariffs and that he should ask to speak with Trump. This would have sent the unacceptable message to Beijing that the Chinese president was submitting to the US president, who initiated the impasse.
There is a tremendous danger.
On Thursday, former Treasury Secretary Janet Yellen told Zain Asher and Bianna Golodryga on HEADLINESFOREVER International, “We’re now in a huge (trade) war with China, and the tariffs that have been imposed on China are what I would call prohibitive.” The U.S. and world economies will be profoundly affected by them. The future of these measures is uncertain.
Like in his first term, when the US and China struck a trade agreement that was never fully implemented, Trump is assuming that the prospect of major repercussions would compel China to negotiate. This occurred even before the COVID-19 epidemic effectively severed US ties with Beijing.
But China’s enormous economic weight and sensitivity to slights from Western nations it perceives as attempting to impede its growth make coercion a risky proposition. Years of patriotic rhetoric and policies geared at surpassing the US have made the Chinese people resistant to outside influence.
During Thursday’s press conference, Trump maintained that his rapport with Xi will determine the outcome. A friend of mine for a long time, in a real sense,” he stated during a Cabinet meeting.
Xi Jinping visited Trump’s Mar-a-Lago estate during Trump’s first term, and the two had “the most beautiful piece of chocolate cake that you’ve ever seen” as he shocked his surprised guest with news of the military strikes he had just authorized in Syria. Trump frequently thinks fondly about the visit.
During Trump’s second term, cake diplomacy is highly improbable.
Xi isn’t particularly into chumminess. Formal diplomacy at lower levels is more to China’s liking while negotiating. In contrast to Trump’s preferred image of powerful people gathering in a room and fighting it out, leader meetings are extremely staged.
Reasons why a US-China trade conflict might have disastrous consequences
The growing economic integration of the US and China is one factor that may make a trade war between the two countries extremely damaging.
Both nations have benefited from years of integration. Consumers in the United States have been able to purchase apparel, footwear, and devices like iPhones at low prices, which has improved the standard of living for the middle class. Thanks to trade with the United States, China has been able to increase manufacturing and help millions of people escape poverty. The high-tech sectors and China’s expanding military have reaped the benefits of these riches.
The American economy has taken a hit as a result of China’s low-priced goods flooding the market, threatening sectors as diverse as the steel industry in the Rust Belt and the furniture industry in North Carolina. Also, the long-held belief in the US’ China policy, that the communist government in Beijing would be loosened by economic prosperity, has not come to pass. Washington hawks on China now claim that America’s addiction to inexpensive consumer products is what made it a powerful opponent in the 21st century.
Many in the foreign policy community believed that the closeness of the US-China relationship would serve as a buffer against the possibility of a military confrontation. But now everyone is talking about decoupling, or the disentanglement of the economies of the two most powerful geopolitical countries in the world, China and the United States.
There would be serious repercussions if US-China commerce dries up. Products that are essential to American life might see a dramatic increase in price. As a result, consumer confidence might take a hit, leading to higher prices and a worsening of living conditions for millions of people. Eventually, this could cause the US to enter a recession.
Returning to its former allies
Due to the seriousness of the possible confrontation, US authorities are frantically trying to come up with a plan.
One possible course of action would take use of the United States’ military might and worldwide influence to put pressure on Beijing to address the long-standing US grievances over intellectual property theft, industrial espionage, and lack of access to American markets.
One catch: Trump’s “America first” slogan would be at odds with it.
Treasury Secretary Scott Bessent noted in a Wednesday interview with Fox Business that the United States will soon be engaging in trade discussions with Vietnam, South Korea, India, and Japan, among US allies. Essentially, he stated, “China is surrounded” as more and more countries are approaching the negotiation table. “How do we get China to rebalance?” Bessent said, suggesting that a shared objective could be one of the points of discussion. The major victory here is that.
The backbone of China’s economy—its small businesses—could take a major hit in the event of a protracted trade war. An increase in the unemployment rate is a constant worry for a country that is fixated on preventing civil disturbance. Although the Chinese government cracks down on opposition, it isn’t immune to its own kind of internal politics, which Western observers tend to overlook.
So, if the United States and China go to war over trade, it may become a brutal test of whose people can endure the most economic hardship.
It could be too late to turn around now.
Former Obama administration Council of Economic Advisers head Jason Furman told Isa Soares on Thursday’s HEADLINESFOREVER International that the United States is currently an extremely untrustworthy partner to everyone across the globe, and he doesn’t see how the country would become reliable again.