Trump's Trade War With China Enters a More Aggressive Phase

Yahoo

15-04-2025

The fact that U.S. President Donald Trump ordered a pause on the raft of new tariffs against most of the world's countries – but not on most of those directed at China – highlights what these new levies are really all about. They are in large part specifically aimed at finally correcting a longstanding imbalance in the trade deficit between the U.S. and China since the Ccmmunist country developed a capitalist twist in the 1990s under former leader Deng Xiaoping. This gap has become increasingly more dramatic through China's use of a variety of unfair trading practices, including export dumping, implicit import barriers and perhaps most notably the sustained manipulation to keep the Chinese renminbi currency undervalued against the U.S. dollar. Trump, his presidential predecessor Barack Obama and successor Joe Biden tried to do the same, but little changed, So, will this new strategy work and what will the geopolitical fallout be if it does not?During Trump's first presidency, he drew considerable disapproval at home and abroad from his approach to China that appeared to conflate three distinct elements that were best left separate according to his critics – national security, trade, and his personal admiration for President Xi Jinping. An early notable case in point had been the almost complete reversal of hard-hitting U.S. sanctions imposed on Chinese telecommunications company ZTE for committing major and repeated violations of the U.S.'s sanctions on Iran and on North Korea. According to former National Security Advisor and former stalwart Trump support, John Bolton (in his book 'The Room Where It Happened'), after a private telephone call to President Xi – in which it later transpired that Xi told Trump that he would 'owe [Trump] a favour' if he reduced the sanctions against ZTE – Trump did exactly what Xi had asked for. Trump tweeted: 'President Xi of China and I are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!' As Bolton wrote: 'Since when we had started to worry about jobs in China?' The same methodology of personally flattering Trump and then offering him some vague commitment on China's part to buy more of some product or another from the U.S. was again used by Xi to hold off Trump from imposing quick, full and irreversible sanctions on another massive Chinese firm accused of being used for intelligence gathering operations against the U.S. – Huawei, according to a senior legal source in the European Union's (E.U.'s) energy security complex. He added that China was very aware at that point that Trump was only concerned with the optics of the U.S.-China Trade War and not with the substance of how those negotiations were progressing. Therefore, Beijing tailored all its so-called concessions to being on issues that were meaningless in practice, but which would allow Trump to make victory-sounding Tweets. Attesting to Trump's focus on appearance rather than reality was an oft-repeated comment by him during his first presidency: 'Every time there's a little bad [Trade War] news the [stock] market would go down incredibly…Every time there was a little bit of good news the market would go up incredibly... And yet, other news that was also very big, the market just didn't really care.' It is perhaps partly in answer to this criticism, says the E.U. security source, that Trump has taken such an aggressive approach to China this time around.
It may also be a recognition of the fact that all previous attempts by predecessors and successors alike to reduce the U.S.-China trade deficit have failed. Following Trump's loss in the 2020 Presidential Election, the Biden government made it clear that three key items related to China at the top of the agenda. First, U.S. companies would no longer be allowed to sign any contracts with Chinese companies that included any element of sharing technology. For decades, the Chinese had insisted that any U.S. company that wanted to do business with China must share its technology with its Chinese partner. This had allowed China to systematically reverse engineer everything that was shared and then to re-sell China-made versions back to the U.S. and the rest of the world at much lower prices, given the much lower unit cost of labour in China than in the U.S. Second, was to put into practice a new mechanism that would correct the long-term bilateral structural trade imbalance trade imbalance is a systematic way that was sustainable overt the decades to come. Specifically, this was to be the introduction of a new metric for China that would create a 'long-term steady-state equilibrium in trade', as there had been with Japan when it had operated basically the same economic model with the rest of the world in the 1960s and 1970s as China had done since the 1990s. This new approach was to be focused on correcting the long-term bilateral structural trade imbalance that had existed between the US and China for decades. Biden's team wanted to impose a strict percentage ratio between the five-year rolling mean average of the U.S.-China goods trade number (a deficit for the U.S.) to the U.S.'s GDP number. For 2019, for example, the figures were a U.S.-China goods trade deficit of US$345 billion, and a U.S. GDP of USD21.43 trillion, so the percentage ratio was around 1.6%. Whatever exact metric was taken, the five-year rolling mean average would be aimed at decreasing that percentage ratio by at least half within the first term of the Biden presidency. For various reasons, this full policy was never successfully rolled out, leaving the U.S.-China trade imbalance an ongoing source of contention.
Consequently, Trump may not unreasonably believe that only a big, bold statement of intent regarding this inequality between the U.S. and China can succeed. However, by reverting to the protectionist ideology seen in the U.S. before 1913 – a point frequently mentioned in Trump's tariffs announcement – many firm, and wavering, allies may see the threat of the isolationist disengagement from global politics that accompanied this stance in the U.S. at the same time. Over and above the potentially cataclysmic ramifications of this for NATO – which has been the key foundation preventing another world war since 1945 – the consequences for the Middle East are enormously profound. Trump made it clear in his 'Endless Wars' commencement address to the United States Military Academy at West Point on 13 June 2020 that he saw the days of the U.S. being the 'policeman of the world' as being over. After this was put into practice with the U.S.'s unilateral withdrawal from the 'nuclear deal' with Iran in 2018, and then in the U.S. withdrawal from Syria in 2019, and Afghanistan and Iraq in 2021, Chinese (and Russian) influence across the door to a massive increase in influence from both Russia and China across the Middle East increased exponentially, as analysed in full in my latest book on the new global oil market order. As it stands, China has said very clearly that it will not back down in what is effectively a huge new trade war, and it has two key advantages over Trump in this respect. First, its people are used to hardship over the very long term. Second, China's leadership never faces the prospect of losing office. For some time now, Beijing has regarded Trump as a 'nation builder', but it is not the U.S. nation it is talking about, it is theirs.
By Simon Watkins for Oilprice.com
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