Trump Vs Xi: Who Will Blink First? – OpEd

There are no winners in a trade war, and going against the world will only lead to self-isolation

China President Xi Jinping

Until Friday April 11, the big question for market analysts and media commentators in the tariff war that U.S. President Donald Trump unleashed on the world was: who will blink first, Trump or President Xi Jinping?

This was because Trump, whilst calling for a 90 day pause to the reciprocal tariffs on the over 180 countries that he announced on 2 April, had not only targeted China to be left out of the pause period. He also escalated the tariff attack by raising the rate on Chinese imported goods to 145% on April 9. In an immediate response, China increased its tariff rate on U.S. imports to 125%.

In the war of words that accompanied the tariff war between the two countries, Trump and his officials have emphasised that they expect China to follow other countries of the world by bending its knee to the U.S. demands and begging for a negotiated tariff deal.  

Such a deal would allow Trump to proclaim victory in correcting the tariff ‘injustices’ which he claims the U. S. has been a victim during earlier administrations.

How Trump Views His Tariff War Impact on World Leaders

In speech after speech, Trump has repeated this not very diplomatic but very effective line of defense to his domestic audience to justify his launch of the global tariff war that has upended share and financial markets around the world and spooked ordinary Americans by its inevitable impact on their cost of living and businesses.

 “I’m telling you, these countries are calling us up, kissing my ass. They are. They are dying to make a deal.”

Mocking the pleas of foreign leaders, he parodied: 

“Please, please, sir, make a deal. I’ll do anything. I’ll do anything, sir!”

On China’s response, Trump has also been insistent on his expectations. 

“China wants to make a deal. They just don’t know how quite to go about it,” Trump said during an event at the White House. 

“You know, it’s one of those things they don’t know quite – They’re proud people.” 

And signalling Xi on a deal that whilst making the U.S. the winner in his tariff war would provide some concessions to China, he told reporters in the Oval Office: “Xi is a smart guy and we’ll end up making a very good deal. Xi is a man who knows exactly what has to be done, he loves his country. We will get a phone call at some point and then it’s off to the races,”

China Response to Trump Overtures

Not only has the phone call not come through, Trump’s admiration of Xi has also failed to have any effect with China making it clear that it is prepared to “fight to the end” in the tariff war. 

According to China’s Ministry of Finance: “The U.S. side’s imposition of excessively high tariffs on China seriously violates international economic and trade rules, runs counter to basic economic principles and common sense, and is simply an act of unilateral bullying and coercion”.

For now, China has responded with a combination of opposition, diplomatic efforts and retaliatory measures. 

Here’s a breakdown of the Chinese retaliation to date

• Retaliatory Tariffs: Chinese officials have described the US tariff actions as a “numbers game” that has no real economic meaning, and that it is becoming a “joke”. At the same time,  China has retaliated with tariffs that are especially targeting American rural communities in the midwest and south that are key electoral support groups for Trump and his Republican party. Significant US sectors also affected by Chinese tariffs include the aeronautical and manufacturing industry and Trump’s “drill, baby drill” favoured oil, gas and coal industries.
• Emphasis on Multilateralism: China has emphasized its commitment to open and free markets and multilateralism; and as a defender of the global trading system. Together with complaints lodged with the World Trade Organization challenging the legality of U.S. tariffs, it has worked to build alliances and strengthen trade relationships with other key global trading blocs, including the European Union and ASEAN. President Xi’s coming trip to Vietnam, Cambodia and Malaysia can be expected to strengthen ASEAN’s resistance to U.S. unilateral bullying and coercion of smaller countries.
• Economic and Strategic Shift: Chinese media and officials have emphasized self-reliance, with the government accelerating domestic production and consumption of critical goods, reduced dependency on the American market and diversification to global South and BRICS countries.

Conclusion 

The U.S. can be expected to blink first in this war between the two global trading giants. This is because while the US remains a key trading partner for China as a major export destination, China is an even more important trading partner for the U.S. in supplying the wide range of everyday products that provide the average American family with a comfortable and affordable lifestyle.

The latest development in this battle over tariffs has Trump suspending the tariff imposition on mainly China imported products covering 20 product categories, including computers, laptops, disc drives and automatic data processing. It also includes semiconductor devices, equipment, memory chips and flat panel displays. All are important to American businesses dependent on their China investments and sales for their bottom line as well as to American consumers lacking access to equivalent acceptable products from anywhere in the world, including from the U.S.

The reality which Trump and his team as well as western economists and mainstream media commentators ignore or prefer not to discuss is that should the tariff war boil down to which country can withstand the pain more, it will be China.