Steven Sahiounie, journalist and political commentator
The U.S. faces escalating economic losses due to the ongoing trade war with China launched by U.S. President Donald Trump.
Leading American corporations are caught in the crossfire due to their heavy reliance on the Chinese market.
Many American corporate giants, such as Apple and Tesla, depend on China as a primary manufacturing hub. This makes any trade restrictions or tariffs imposed on products manufactured in China a significant obstacle to profitability for these companies.
Semiconductor companies have suffered a shocking setback after China halted exports of certain critical raw materials used in these industries. The consequences saw a sharp decline in stock prices, disruptions in supply chains, and loss of investor confidence in the stability of the U.S. market.
A spokesperson for China’s Ministry of Foreign Affairs recently published a satirical post revealing that the iconic red hat, MAGA, worn by President Trump during his election campaign was made in China. Beijing viewed this as clear evidence of the pervasive reach of Chinese manufacturing into all sectors of the American economy—even the symbolic ones.
While China is not immune to damage by the Trump tariff war, the impact on its economy will be less severe compared to the U.S. The Chinese market has several key factors that can defend against damages. Firstly, the Chinese people strongly support their government and stand behind its decisions to counter U.S. pressure. Secondly, China’s leadership acts swiftly and decisively, granting it more political and economic maneuverability. Thirdly, China looks at this trade war as an opportunity to make changes to its global position. Although the U.S. is a superpower, the unity of the Chinese government with its people serves as a defense against the tariff attack initiated by Trump.
Some analysts see the recent US policy trends as an attempt to change the global trade system. Trump may be charting a course correction of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). GATT and WTO have faced criticism that the current system lacks fairness in trade practices and is ineffective in dispute-resolution strategies.
Trump’s global trade war aims to protect strategic industries, bolster national security, and negotiate more substantial bilateral and regional agreements. The obstacles to Trump’s plan include international resistance, and the punitive effects on the U.S. economy, which saw the stock market crash before Trump paused the tariffs, allowing for a somewhat recovery. The Trump plan lacks moderation, so it swings like a pendulum, not yet finding a happy medium.
In 2023, U.S. exports to China totaled $154 billion, while imports from China reached $436 billion. Despite trade tensions, China remains the third-largest trading partner of the U.S., with American direct investments in China standing at $126.9 billion in 2023. Conversely, Chinese direct investments in the U.S. amounted to $28 billion in the same year.
The trade between the U.S. and China is strategic to both country’s economies and peoples. The two powerhouses depend on each other for success. Trump may be attempting to realign the previous imbalance between the two, but this is a complex and risky endeavor, and many economic experts view a trade war featuring tariffs as not the best vehicle for change.
Trump’s possible goal is to use the trade war and tariffs to push China to the negotiating table, where a new global trade order could be agreed upon. Trump may place high tariffs on other trading partners besides China to create new rules in the shifting global power dynamics.
The changes may be necessary, but they face significant obstacles, such as a lack of trust between nations, conflicting priorities, and domestic political battles that could hold up consensus. A comprehensive global trade agreement that serves the interests of all parties will be a tall order to fill.
Trump will likely continue in some form to effect a change in the global trade system, to level the playing field somewhat. It is not yet clear whether he would attempt a full dismantling of GATT or only a type of reform. It is clear that the interdependence between the U.S. and China is immense, and negotiations remain the most effective and fair path forward to address the imbalances.
Professor Winter Nie is the regional director of Southeast Asia and Oceania for IMD Business School. Nie wrote an article published in Forbes in which Nie laid forth possible repercussions if Trump decided to fulfill a campaign promise of imposing tariffs on China.
After Trump blindly began his promised trade war, he suffered the consequences, and ordered a 90-day pause on April 9, on all countries except China, which is now at 145%. The other countries will remain at 10% tariffs until July.
On April 11, Trump exempted smartphones, computers, and some other electronic devices from “reciprocal” tariffs, including the 125% levies imposed on Chinese imports.
Nie pointed out, the fastest-growing markets for laptop computers and cell phones made in China are India, Latin America and Africa. Chinese consumers bought 131 million iPhones by the end of 2015, but the U.S. customers only bought 110 million during the same period. China is expected to buy 6,810 airplanes over the next 20 years, and that order worth more than $1 trillion may go to Boeing in Seattle which employs 150,000 workers in Washington.
In a trade war, the U.S. might blink first because the U.S. needs China more than Trump calculated.
Many Trump voters shop at Walmart, which buys billions of cheap goods from China. When the prices they pay for goods at Walmart skyrocket, those MAGA supporters will be disillusioned and hurt economically. The higher prices would be a direct result of the Trump imposed tariffs.
The world is captivated as China and the US spar in the Trump tariff-induced trade war. If the two sides do not reconcile their differences and cannot find a happy medium to balance their trade, both sides will feel isolated and that can be dangerous.
Military action between China and the US might be provoked by the trade war unless peacefully resolved. Trump has flip-flopped since 2017 on the Taiwan question. At one point he was against the One-China policy, and then later embraced the official US position which dovetails with Beijing.
However, in February, two dozen Republican lawmakers backed a resolution recognizing Taiwan, and they were hopeful of swaying Trump in their direction. The unexpected consequences of the Trump trade war against China might be war.
Steven Sahiounie is a two-time award-winning journalist.
