Cogito Ergo Non Serviam
US-China Trade Will Shrink
The Trump administration has decided to engage in a trade war with the entire world (except for Russia, North Korea and Belarus, it seems), and this war will be fought on many fronts. Most of the nations attacked will retaliate while some will offer to negotiate. None of it will be decisive except for the US trade with China. This amounts to almost $600 billion in trade per year. Mr. Trump has hit China with a 30% tariff over and above whatever else was in place before last weeks kamikaze attack on global trade. China has said it will match that. If they do, the president has threatened an additional 50% tariff. It is easy to see how that $600 billion in trade can turn into $6 billion before long.
There is a lot of talk about who wins and who loses in these trade fights, and opinions do indeed differ as experts focus on different factors. Gordon Chang, who has forgotten more about China than most ever knew, says China cannot win because President Xi is wedded to exports rather than domestic consumer spending. That means he is relying on the American market. This journal agrees, but the US position is not very strong either, given inflation and deficits. The fact is that no one wins a trade war; there are only varying levels of defeat.
The US Trade Representative Jamieson Greer just testified to Congress that midnight is the deadline and that they will go into effect. The brief respite the stock market is enjoying this morning (a dead cat bounce) should be gone at the opening bell tomorrow. There will be some revenue, of course, from these taxes, but it will not be sufficient to make up for the losses incurred.
So, what comes next? Nothing is the easy answer. Neither Washington nor Beijing is going to back down right away. Mr. Trump has beat his chest and made his move. Those who think it is all a negotiating strategy have yet to realize other nations may not cooperate.
"Anyone expecting President Xi to come calling and seek a call with President Trump following April 2 tariff announcement is being dangerously naive," Ryan Hass of the Brookings Institution posted on X on Friday. "Anyone advising Trump that Xi will beg for forgiveness is committing malpractice. That is not the mood or the plan in Beijing now."
Negotiations on trade take time. Talks that lead to the US-Canada Free Trade Agreement of 1988 began in May 1986, and it was preceded by decades of smaller agreements between Ottawa and DC. The US-China situation is less amenable to discussions because there is much more to discuss and far fewer areas of basic agreement on how things should proceed. But if it were exactly like the US-Canadian situation in the 1980s, there would be no deal until right before the mid-term elections. In the meanwhile, trade between the two will plummet to the detriment of both sides.
China is going to make moves to replace the US consumer with other non-Chinese customers. The Associated Press interviewed a few average Chinese people about their buisnesses, and this stood out: Paul Wang, 30, who sells stainless accessories, including necklaces, bracelets, and tongue studs to Europe, said the European market was now more important after the extra U.S. 50% tariffs and he would be watching to see which other firms in his field would be competing in that space.
The Americans will have a harder time replacing China as a supplier. There are other nations that can pick up some of the slack, e.g., Vietnam. However, they lack the scale and the industrial capacity to replace China completely. One would be surprised if a majority of Chinese goods could be sourced elsewhere in a few months.
It would be best if Messrs. Trump and Xi stopped acting like a couple of little kids arguing over whose dad could beat up the other and start acting like the lives of billions are affected by their decisions.
© Copyright 2025 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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