China has overcome Donald Trump’s
trade war and
tech sanctions before. This time, it is in a much stronger position to withstand new threats. As a result, the United States could pivot away from trade confrontations towards
information and
financial warfare. However, China’s nearly US$1 trillion trade surplus would be a strong buffer against financial instability.
Trump began the trade war with China in 2018. By 2023, exports from mainland China and Hong Kong to the US had fallen by about a quarter. Less exposure to the US market has made China more resilient to new tariffs, which reduces the incentive for Washington to escalate the trade war.
Trump talked about a 60 per cent tariff on Chinese goods during his campaign. More recently, he floated the idea of an
extra 10 per cent on top of the existing tariffs. He also wants 25 per cent duties on Canadian and Mexican goods.
Many auto workers voted for Trump despite benefiting from trade and being able to buy cheap Chinese television sets, for example; their real competition is arguably coming from Mexico and Canada. No amount of tariffs on China would bring the production of TV sets back to the US. But tariffs on cars from Canada and Mexico could revive US carmakers. Trump’s tariff policy should tap into this possibility.
The US wants to weaken China without
hurting itself. Getting allies to
join the tech war against China has been one way to achieve this. The tech war can be expected to escalate during the second Trump administration, perhaps with the incoming president forcing European, Japanese, South Korean and Taiwanese companies not to sell to the mainland Chinese market; this way,
their economies would be hurt but not the US’.
The US tech war also dovetails nicely with Washington’s
industrial policy. It wants the key tech sectors in the US, not Asia. American policymakers are likely to coerce globally competitive companies in Japan, South Korea or Taiwan in the relevant sectors into moving to the US.
This post was originally published on here
