US-China trade war: Trump's secret strategy revealed

US-China trade war: Trump's secret strategy revealed

The rapidly escalating trade war between the United States and China – the world's two leading geopolitical powers whose economies are closely intertwined – threatens to cause significant damage to both nations and will send shockwaves around the world.

Strategy or improvisation?

Since President Donald Trump launched this potential disaster, the question has been whether he has a strategy and how he sees the end game. As usual, Trump improvises. His shocking escalation of the Tariffs on China This week didn't follow any meaningful formula. As always, he acts like a real estate shark, raising the stakes to unbearable levels to gain an advantage. This is the latest manifestation of the “Crazy Theory”, according to which Trump conjures up the most extreme circumstances to intimidate his opponents.

Massive risks for both sides

Maybe it will work, and China, uninterested in ruining an economy that can no longer boast eye-popping growth figures, will hastily return to the negotiating table. Many China experts believe that Beijing is no more likely to want to go to the brink of the abyss than Trump himself. But the risks are enormous.

“We are now in a full-scale (trade) war with China, and the tariffs that have been imposed on China are what I would call prohibitive,” former Treasury Secretary Janet Yellen said on CNN International on Thursday. "They will have a massive impact on the United States and the global economy. Nobody knows where these policies will lead."

Trump's tactics and their consequences

Trump's tactics are based on the assumption that the threat of massive consequences will force China to negotiate - as was the case in his first term, when the two sides reached a trade deal that was never fully implemented, even before the Covid-19 pandemic largely stalled US-Beijing relations.

But forcing economic action could backfire, as China's huge economic weight and sensitivity to insults from Western powers that see it as an attempt to prevent its rise could provoke serious backlash. After years of nationalistic policies and propaganda, the Chinese population is unlikely to respond well to threats.

Diplomacy at different levels

On Thursday, Trump confirmed that he has increased tariffs on Chinese imports to 145% and insisted that his personal chemistry with President Xi Jinping will be crucial. “He has, in a real sense, been a friend of mine for a long time,” he said at a cabinet meeting.

Trump often nostalgically recalls Xi's visit to his Mar-a-Lago resort during his first term, when the two "ate the most beautiful piece of chocolate cake" and he informed his stunned guest about military strikes he had just ordered in Syria. But such “cake diplomacy” is unlikely in Trump’s second term.

The challenges of collaboration

Close cooperation between the global trading nations of North America and Europe would be difficult for Beijing to ignore. Yet everything Trump has done since his return to the Oval Office has been aimed at destroying this group of like-minded democracies. Several times this week he has criticized the European Union, saying: "The EU has been very tough over the years... I always say it was founded to really hurt the United States on trade."
This contradicts US policy, which for many years was aimed at supporting a strong EU as an ally of prosperity, unity and democracy in a continent that has been at the center of the bloodiest wars in human history.

Consequences of a trade war

One reason why a trade war between the US and China could be so disruptive is because of the close ties between the two economies. Years of integration have helped both countries: U.S. consumers benefit from cheap access to clothing, shoes, electronics like iPhones and other consumer goods, which has improved the quality of life for the middle class. China, on the other hand, has used U.S. trade to expand manufacturing and lift millions out of poverty.

However, if US-China trade breaks down, the consequences will be painful. Prices of goods that are an essential part of American life could skyrocket, fueling inflation and worsening the quality of life for millions. That could weaken consumer confidence and send the US into recession.

The search for a strategy

The magnitude of the potential conflict is forcing U.S. officials to search for a strategy. One approach could be to use American strength and global power to pressure Beijing on issues such as market access, intellectual property theft, industrial espionage and other issues. The only catch: It would conflict with Trump’s “America First” mantra.

The idea of ​​forming an anti-China cooperative alliance of US-allied powers is not new. In fact, Trump has already rejected it once, withdrawing from the Trans-Pacific Partnership agreement, which included 12 nations, including allies like Mexico, Canada, Japan and Australia, on the first day of his first term.

It may already be too late to change course. “The United States is an incredibly unreliable partner to everyone in the world right now, and I don't know how we can become a reliable partner again,” said Jason Furman, who led the Council of Economists during the Obama administration.