When President Donald Trump imposed his sweeping tariffs on April 2, he had two main objectives:
- Reduce the trade deficits
- Bring jobs and manufacturing back to the United States
These were the stated goals but, as we soon found out, the real aim was to weaken China by preventing them from selling goods to US consumers. The Trump administration also used the tariffs to isolate China by providing incentives to the nations that agreed to reduce their trade with Beijing. In short, the tariffs were the main weapon in a trade war on a peer competitor who has overtaken the US in nearly every area of industrial and technological production.
Fortunately, Trump’s plan failed, and he was forced to ease the tariffs without achieving any of his main objectives. The reason we say “fortunately” is because the tariffs policy never served the interests of the American people. Quite the contrary, Americans are hurt by unilateral policies that ignore the rules of international trade and needlessly disrupt supply chains. All that does is push prices higher, reduce employment and slow growth. Besides, manipulating tariffs with the intention of destroying a rival violates a number of widely accepted WTO rules that protect the interests of everyone.
In contrast to the US, China acted in a way that was consistent with their broader social philosophy which is rooted in their unique interpretation of socialism. They took the moral high ground, acted on principle, and refused to give in to Trump’s coercion. They only initiated countermeasures in response to Trump’s tariffs blitz that completely ignored the rules articulated in the General Agreement on Tariffs and Trade (GATT) which stipulates that countries cannot arbitrarily exceed “bound rates” or selectively target one country with 145% tariffs. (which is the equivalent of an embargo.) By acting alone, Trump basically showed his contempt for the international system and for any legal constraints on his own power. This is from the Global Times:
The multilateral trading system with the WTO at its core is the cornerstone of international trade and plays an important role in global economic governance. All parties should resolve differences and disputes through equal-footed dialogue under the framework of the WTO, jointly uphold multilateralism and free trade, and promote the stability and smooth functioning of global industrial and supply chains. Global Times
In other words, Trump’s loss was a victory for the system of international trade. But it was also a victory for China because China ‘stuck to its guns’ and refused to bow to Washington’s bullying. Here’s more from Bloomberg:
Xi Jinping’s decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader.
After two days of high-stakes talks in Switzerland, trade negotiators from the world’s biggest economies announced Monday a massive de-escalation in tariffs. In a carefully coordinated joint statement, the US slashed duties on Chinese products to 30% from 145% for a 90-day period, while Beijing dropped its levy on most goods to 10%.
The dramatic reduction exceeded expectations in China, and sent the dollar and stocks soaring — providing some much-needed market relief for Trump, who is facing pressure as inflation looks set to speed up at home. Chinese equities also surged. The deal ended up meeting nearly all of Beijing’s core demands. The elevated “reciprocal” tariff for China, which Trump set at 34% on April 2, has been suspended — leaving America’s top rival with the same 10% rate that applies to the UK, a longtime ally….
“This is arguably the best outcome that China could have hoped for — the US backed down,” said Trey McArver, co-founder of research firm Trivium China. “Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiations.” , Swiss Info
Repeat: This is the best outcome that China could have hoped for — the US backed down”
US policy towards China is not only deeply immoral; it’s also counterproductive. Anyone who followed recent events in the foreign press, understands that the United States hurt itself very badly by its bullyboy tactics. What people outside the United States saw was an aging and enfeebled prize fighter enter the ring with a ferocious young contender who knocked him out in the first Round. In less than 6 weeks, Trump removed the bulk of the tariffs leaving just 30% in order to save face with his backers. In exchange, he got nothing from China at all. Beijing made no concessions other than allowing Trump to increase the tariff on Chinese imports from 20 to 30%, which means that the blue-collar men and women—who are Trump’s most ardent supporters—will pay an additional 10% at their favorite department store. So, while Trump promises massive new tax cuts for the uber-wealthy, working people just saw their taxes hiked by a whopping 10%. Here’s more from the Guardian:
Donald Trump will inevitably claim Monday’s temporary truce in the US-China trade war as a victory, but financial markets seem to have read it for what it is – a capitulation….
In other words, the president has caved. He may have been swayed by market wobbles but it seems more plausible that dire warnings from retailers about empty shelves – backed up by data showing shipments into US ports collapsing – may have strengthened the hands of trade moderates in the administration.
Confronted with warnings of a shortage of toys, Trump told reporters that children should be happy with “two dolls instead of 30 dolls”, and they might “cost a couple bucks more” than usual. But it is difficult to imagine even this most bullish of presidents withstanding the attacks that would come his way if he began to be seen as responsible for Covid-style shortages of key goods in the world’s largest economy.
Instead, the White House seems to have opted for tactical retreat. The China-US conflict was always the hottest theatre of confrontation in Trump’s trade war, with a longer history and deeper public support than his quixotic attacks on Mexico and Canada.
If Trump is indeed ready to give in even with Beijing, it sends a signal that some of the other aggressive aspects of his trade policy may be negotiable. Trump might claim China tariff victory – but this is Capitulation Day, Guardian
As far as Trump’s stated goals, (to reduce the trade deficits and bring jobs and manufacturing back to the US) the president failed on both counts. But in respect to his unstated goals, (weakening and isolating China) he also failed. And the reason he failed is due to three things:
- China was able to maintain global trade flows through diversification (They found other buyers for US-bound exports)
- China responded to the need for fiscal stimulus and government intervention quickly (which maintained their growth targets)
- China was able to inflict serious pain on the US by withholding its exports which left ports on the West Coast in deep distress.
What China achieved is as close to a complete victory as one could imagine. Even so, the equities markets skyrocketed shortly after a settlement was announced, which is why no one seems to care about Trump’s embarrassing miscue.
One of the oddities of the tariffs dust-up, was the fact that the Trump team never anticipated China’s retaliatory response. It’s actually amazing. The administration lives in such an information bubble that they thought China would cave in after their comical “Liberation Day” announcement. What were they thinking?
We know what Secretary of the Treasury Scott Bessent was thinking because he made a number of public statements that the US had an edge on China because ‘we were the deficit country.’ Here’s what he said in an interview on CNBC:
“We are the deficit country. They sell almost five times more goods to us than we sell to them. So, the onus will be on them to take off these tariffs. They’re unsustainable for them.” He cited estimates that China could lose 5-10 million jobs if tariffs persist, highlighting China’s economic vulnerability.
This is idiocy. This is like saying that the ragamuffin panhandler on the street-corner has the advantage over the flush businessman with millions in the bank. The US is $36 trillion in debt while China has a $3 trillion surplus! How does ‘being broke’ give us ‘the advantage’. We’re lucky that China still accepts our currency at all, and yet, our Treasury Secretary thinks that being destitute gives us the “upper hand”. A man like this should not be Treasury Secretary. He has shown repeatedly that he doesn’t have the foggiest idea of how the economy works or what policies will help to advance American interests. Here’s Grok on Bessent:
Bessent’s public statements reflect a strategic focus on the U.S.’s deficit position as a negotiating advantage, supported by China’s economic vulnerabilities and the eventual Geneva deal. However, China’s export shift to Southeast Asia, transshipment tactics, and domestic economic resilience suggest he underestimated Beijing’s ability to weather tariffs, limiting the U.S.’s edge. Both sides faced costs, but China’s adaptability meant the deficit advantage was less decisive than Bessent claimed. (Grok)
That is a rather long-winded way of saying the Bessent was wrong about everything.
We should all be grateful that Trump gave up on his ‘tariffs strategy’ before it inflicted even more damage on the US economy. We can only hope that he will reflect on what has transpired in the last few weeks and seriously reconsider Washington’s self-defeating relations with China. The consensus view among western elites, media and the entire political class is that China’s rise represents a grave threat to America’s privileged position in the world order. It is this misguided assumption that shapes US policy on China and puts us all on course for a military confrontation. We must eradicate this destructive idea at its root and look for constructive ways that we can work with China on projects that help to improve security, increase prosperity and end war.
China is not our enemy, and they do not seek a confrontation with the United States. What China wants is what most ordinary Americans want; peace, security and “a human community with a shared future in an open, inclusive, clean, and beautiful world.” Those are the words of China’s Premier Xi Jinping. His sentiments may seem familiar to older readers who may recall the equally powerful words of President John F. Kennedy who said:
“For, in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.”
You Tube—John F. Kennedy’s Commencement Address at American University, ‘A Strategy for Peace’
