Economic War: US v. China

There’s little question among economists that President Felonious Punk’s tariffs have ignited a global trade war. Smaller countries such as Vietnam are scurrying to find some form of favor with the President in hopes that perhaps he will reduce the tariffs placed upon them. However, after Israel’s Benjamin Netanyahu left the White House yesterday without any reduction in their 17% tariffs, the indication was that the President has dug in and is ready to fight.

Most of the tariffs go into effect at midnight, tonight, Eastern daylight time. The country getting hit the hardest, of course, is China. As the country’s leaders have gone back and forth with various threats, it will become clear in the early hours of tomorrow morning whether either side is going to flinch.

For his part, the President on Monday threw a solid punch when he suggested that he might order an additional 50% tariff on Chinese products, which would bring the total to 104% for the country. In a social media post, the President said, “Therefore, if China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th. Additionally, all talks with China concerning their requested meetings with us will be terminated!”

The chances of China backing down? None. Zip. Zero. “Tariff blackmail will not intimidate China, nor will it undermine justice,” state-backed English-language media outlet Global Times wrote in an editorial. “Pressuring and threatening are not the right way in dealing with China.”

This morning, China is taking an even stronger stand, saying that it will “resolutely take countermeasures” if President Trump carries out his threat to impose an extra 50% tariff on Chinese goods. The Chinese Commerce Ministry said in a statement carried by state media: “China will fight until the end if the U.S. side is bent on going down the wrong path.”

Everyone else is carefully watching the two economic heavyweights in hopes of getting some idea as to which country to back. Neither is exactly desirable at this point. China is, after all, communist and will continue to impose communism wherever it can, especially among Southeast Asian countries such as Korea and Vietnam. The US, at the same time, is not only showing that it is unstable, but that its word cannot be trusted. President Punk has quickly proven that the US is willing to allow a new president to come in every four years or so and completely upend what had been a strong and reliable economy.

What’s frightening China is that some Chinese-based retailers, such as Shein and Temu, are considering moving their operations to somewhere not burdened by such heavy tariffs. The entire model of the two companies depends on being able to sell severely discounted and often poorly developed products to the US market that just can’t seem to get enough trash.

The Chinese Ministry of Commerce has discouraged Shein and other companies from diversifying their supply chains by sourcing from other countries, and Shein has halted reconnaissance tours of factories in Vietnam and other Southeast Asian nations. The Chinese government’s intervention reflects a deepening fault line between China and its exporters, as the state effort to protect the domestic manufacturing sector clashes with companies seeking to dodge rising costs.

With such a withering from its strongest companies, China is betting that it can call Punk’s bluff and possibly deliver a blow or two of its own. No one has said yet if the country might raise tariffs against the US even more than the present level, but such a move could easily come tomorrow morning as tariffs take effect.

China enters the new age of MAGA stronger than in Mr Punk’s first term. President Xi Jinping has long argued that America is too polarised and overstretched to sustain its global role. One of his slogans warns of “great changes unseen in a century”. His paranoid nationalism used to seem like dystopian hyperbole. Now that Mr Punk is committing such wanton self-harm and general destruction, it looks ahead of its time.

China is betting that MAGA talk of a “reverse Kissinger” deal, with America prising Russia away from China, is silly. And Punk-based protectionism, ally-abuse, and indifference to human rights are a repudiation of American values: the beacon of the free world now seems capricious and dangerous. Mr Xi has no intention of filling the vacuum left by Uncle Sam, but he has a chance to expand China’s influence, especially in the global south. If, as well as spreading clean technologies, China becomes bolder about cutting emissions at home, it could show leadership on climate change.

However, should the tariffs spark a full global recession, all bets are off. There’s no chance that anyone wins that fight. The only question becomes, who loses more. Neither country is as stable as they like to pretend, and a deep recession such as 2008, or worse, the prospect of a new ‘Great Depression,’ could propel both countries back to the economic Dark Ages.

There’s plenty of angst to go around. At least 12 Republican senators have expressed concern over Punk’s Tariffs, as have major billionaire donors, such as Jamie Dimmon, who are warning of an ‘economic nuclear winter’ if the tariffs are not quickly lifted. Still, the President has dug his heels in pretty hard. Any kind of pause is likely to be taken as a weakness.

Any chance for a reprieve from either side has to come today, and it’s already getting pretty late in China for that to happen. We’re all at the mercy of a couple of grouchy old men (Xi is 71, Punk is 78), neither of whom want to be seen as a loser. Both have histories of outrageous acts in the past.

The bell to start the war rings at midnight.