News Analysis
After days of intense tariff escalation between the US and the Chinese administration, the two countries have entered a new era of conflict and rising decoupling.
That’s according to experts who think there’s very little chance of a reversal.
President Donald Trump’s announcement of 34% mutual tariffs in China began a series of tat moves on April 2, along with higher taxes in dozens of other countries. Mutual tariffs were imposed to counter the administration’s decades of unfair trade practices.
Trump raised US tariffs by 50% after Beijing retaliated with its own 34% mandate.
The US-China tariff standoffs are a battle for the world economic order, experts say.
According to these analysts, there is little room for meaningful negotiations between the US and China. Now it’s time to see which of the other two countries line up.
The two countries are heading towards a “clash,” according to James Lewis, senior vice president of the Think Tank Centre at the Center for Strategic and International Studies.
“China is not going to give up. They have been planning a way to deal with this since at least November,” Lewis told the Epoch Times.
“They were hoping for decoupling. They’re planning,” he said.
“Trump accelerated that, but we’ve been planning how to manage decoupling since at least last year.”
Mike Sun, a US-based businessman with decades of experience advising foreign investors and traders doing business in China, said the world’s largest and second-largest economic showdown has been on Beijing’s prospects since Trump’s first term. Sun uses aliases to protect herself from retaliation.
During the previous Trump administration, China proposed to buy US products. Sun said this addressed Trump’s needs to reduce the trade deficit between the two countries. The negotiations led to the “Phase 1” trade agreement signed in January 2020, but Beijing did not fulfill it.
However, this time the game is different.
Citing its goal of achieving reciprocity in all countries, Trump is trying to rebuild a global economic order, Sun told the Epoch Times.
“The Chinese Communist Party has seen the difference between Trump’s current and previous approach,” he said.
“The administration has chosen to fight because it has seen that concessions to the US lead to a future where it can’t get a stomach ache.”
April 9 marked a turning point moment in US-China relations, he said. The Chinese administration has crossed the threshold as it is merely a strategic competitor of the United States and began moving towards enemy positions like the Soviet Union during the Cold War.
Chinese expert Alexander Liao said the CCP has little room for policy to pilot. Therefore, he said it is likely that Beijing will resort to invading Taiwan to turn the table. The insider information he recently obtained from the Chinese military appears to support his views.
How will the Allies respond?
Since Trump announced the mutual tariffs on April 2, the US stock market has been on a roller coaster ride, from an invisible three-day decline since the summer of 2020 to its biggest day-to-day rally since 2008.
The uncertainty associated with the actions of the US president has plagued investors and some of their allies.
Based on Lewis’ conversation with Brussels officials, he said that politicians there are now tending to be separated from the United States.
He said Europeans are offended by the unpredictable nature of Trump’s decision.
Liao said he thinks Trump might push Europe a bit. After all, the difference between the two ideologies is enormous.
“Being with China brings enormous moral pressure,” he said. He mentioned the administration’s terrible human rights violations.
Alexander Gray, CEO of American Global Strategies and a senior national security officer under the first Trump administration, praised Trump for “leaning the United States into a superior strategic position.”
10% is four times the average tariff level in the US earlier this year.
Lewis acknowledged Beijing’s intention to dominate the global market with industrial policy.
He said playing on Chinese terms in the global market means losses in the US, Japan, South Korea, Europe and other countries.
“So if you remain connected to China under the current conditions, you’ll lose,” Lewis said.
Despite this, Lewis said he was concerned that Trump’s actions would move the global economy from the US to China, including Europe.
Gray said China’s actions will be heavier in alliance considerations than US actions.
“(Trump) puts it in China to reveal what many of us already know. The PRC has built an economy designed to run economic wars to perpetuate the administration,” he said.
“It is unwillingly impossible to change Beijing’s behavior, so we will reveal what the CCP is and integrate the US, its allies and partners into unified Xi’s malignant activity.”
Can I use Xi Outwait Trump?
Analysts placed emphasis on the risks and factors that support each camp with an ongoing trade standoff.
Lewis said it is important to recognize the benefits of the Chinese administration in holding back.
“They can feel more pain than in the US because, if there’s nothing else, they don’t have a medium term, because they realised that all Republicans are struggling with the medium term,” Lewis said. “I think China has a higher tolerance to pain.”
The Chinese administration operates on a different timeline than the US administration.
Lewis said he learned from administration sources that he expects Trump’s team to make all the changes in three to six months.
“In this case, Xi Jinping can drive Donald Trump off the street,” he said.
According to Liao, the world has not seen protests on the streets of China, but CCP leader Xi Jinping is under great pressure.
Liao doesn’t think XI is worried about the Chinese people, but he said that party elites and officials could pose a real threat to Xi’s power.
When the elites opposed the direction of their policy, they were able to unite and support another leader.
The backstage of XI’s industrial policy is that it artificially boosted manufacturing, created many overcapacities, and increased the Chinese economy’s dependence on exports. Trump’s tariffs will hit major states supporting China’s economic growth: Guangdong, Z Jiang, Jiangsu. They are all coastal and export driven.
A slump in the economy can hurt the wealth of communist elites, and the outcome can be disastrous. There is a precedent in the history of CCP.
Party chair Hua Gufen, who succeeded Mao Zedong, was defeated by Den Zaiaping in the struggle for power in 1978.
The reason for this could be used to steal the XI, Riao said. The opacity of communist dictatorships means that outsiders will not see any signs of turmoil until a new dictator is established, he said, unlike a democratic society where pressure on political power is publicly disclosed.
Liao said he believes Trump needs to improve domestic employment and inflation to survive the XI standoff. The resilience of the US economy is a strong supporter for Trump.
The US Treasury Department for the 10-year period on April 9 still shows solid investors’ demand at its $39 billion auction. Yields were lower than expected, but still had the highest profits per week since June 2013.
Robust bond sales and stock market rebounds show that the foundations of the US economy are still strong, Riao said.
Taiwan
Liao said he believes Xi might invade Taiwan to turn the tide.
“The Chinese Communist Party would want to change the basic drivers of the market,” he told the Epoch Times. “This is a global buyer market due to overpower in peacetime, and America has the most power in being the biggest buyer.
“However, participating in the war means turning the economy into a market for sellers. Whether they sell weapons or equipment, war maximizes China’s manufacturing.”
In comparison, US manufacturing was $2.5 trillion in 2021. The World Bank database does not use data for 2022 and 2023 in the US.
According to sources from Chinese military Riao, the People’s Liberation Army (PLA) has issued an internal communica- tion focusing on three points.
First of all, a war with Taiwan will occur. The situation may resemble the Korean War, in which peace talks took place that lasted more than two years in the battle.
Second, a war between China and the United States should arise.
Third, the PLA distributed insignias of various branches of the US military for Chinese forces to study, allowing enemy branches to be identified in battle.
“The atmosphere is quite nervous at PLA,” Riao said.
“War can solve many problems with XI. First, the economy is less important anymore. Second, he was able to calm his opponents within the CCP and give the Chinese people external reasons to justify Communist control.”
