US President Donald Trump has dramatically escalated his trade war against China and the entire world. Peddling a simplistic, zero-sum narrative that the United States is treated “unfairly” in global trade and being “ripped off”, the president has unleashed enormous tariffs against every single country, sending global markets crashing and creating widespread fears of a global recession. His logic? That such measures will bring back jobs and manufacturing to the US, and those affected will respond by giving Washington full market access, among other concessions.
China, which has always been Trump’s primary trade antagonist, is being singled out. The president raised the levies on Chinese goods imported into the US by 34 percentage points to 54 percent, which led to a series of countermeasures from Beijing. Naturally, it is in Trump’s nature to respond to countermeasures by threatening, and subsequently escalating, even further. He then mooted the idea of raising the levies on Chinese goods by another 50 percentage points to 104 percent, expressing his belief that Beijing will ultimately capitulate to his tariff measures and “correct” the “trade imbalance”. The White House press secretary, Karoline Leavitt, confirmed on Wednesday that the new tariff rate of 104 percent took effect on the same day.
While it is my personal belief that China should negotiate with the US, Beijing has nonetheless made it abundantly clear that it has no intention of capitulating to Washington’s “coercion” and “bullying” and will stand firm. First of all, Trump’s leverage is not what he claims it to be. The president, as noted above, frames global trade in simplistic “zero-sum game” terms that consists purely of “winners” and “losers”. This is a total distortion of economic reality.
The US is a high-income country. Because it is wealthy, it is expensive for companies to manufacture domestically. And because the US spearheaded the creation of a globalized economy, most American companies have voluntarily opted to base manufacturing overseas to cut costs. We might ask ourselves: Apple Inc’s OEMs (original-equipment manufacturers) manufacture iPhones in China and export them back to the US, which counts as Chinese exports; is this really a case of China winning at the US’ expense? Factories in China produce those phones, supplying many key components, but they do not profit much from the monetary value of the phone sold in an American store, which far exceeds the production cost or the export price. Does that profit go to China?
There are numerous more examples, and while it is true China has ascended on the production-value chain, it is enough to make our point that trade is not a zero-sum game but a pattern of economic interdependence between countries. If China became too expensive to make something owing to the impact of Trump’s tariffs, a China-based company will only move to a more affordable destination, such as Vietnam. In no instance will the production reshore itself in the US because there is no practical or economic benefit to do so, notwithstanding the fact that Trump has slapped massive tariffs on Vietnam and on every other country in Southeast Asia anyway.
In this case, it is a consensus among experts and economists that Trump’s measures will induce skyrocketing inflation, a potential global recession, and have triggered a crash in markets all over the world. It is a self-imposed disaster premised on fantasy economics. Because of this, China has no need to panic and certainly has no rush to give in to Trump’s assaults on its economy. Logically, it should vest diplomatic time and resources into deepening its trade ties with other countries and framing itself as the champion of the global trading system that Trump wants to destroy. Countries around the world will be seeking to hedge their bets, and in doing so, China should be prepared to open up its domestic market further to deepen trade ties across the world accordingly. Trump constitutes chaos, destruction, turmoil, while China offers stability, certainty, and prosperity. The choice could not be clearer, and European countries, Japan, and South Korea, among others, should think carefully about this. Trump doesn’t want compromise; he wants capitulation and demands the affected countries surrender their entire market and industrial base to American companies, gutting their own industries, their jobs and prosperity.
As one commentator put it, he will turn Canada into the next Detroit if he gets his way. Talk where you can yes, there are benefits to mutual trade ties with all of course, but never give in to Trump’s coercion.
The author is a British political and international-relations analyst.
The views do not necessarily reflect those of China Daily.
