As we, China began trade negotiations in Geneva, Trump’s tariff hammer looks less than he claims
Someone forgot to tell China. So far, the Chinese have refused to fold under pressure from Trump’s massive tariffs. Instead, they retaliated against their triple-digit tariffs.
The Chinese Foreign Ministry announced in a video last week: “All bullies are paper tigers.” Kneeling only invites more bullying. ”
The bets were high between the world’s two largest economies, with their trade exceeding $660 billion last year. Bessent and Trump’s top trade negotiator Jamieson Greer will travel to Geneva this weekend to hold preliminary trade talks with top Chinese officials. Trump suggested on Friday that the U.S. could lower tariffs on China and said in a truth society post: “The 80% tariff seems to be correct!
While businesses and investors welcome any ease of tensions, the prospect of a quick and significant breakthrough appears dim. “These are talks about negotiations, and China may be evaluating what’s on the table, even just to buy time,” said Craig Singleton, a senior China fellow at the Washington-based Democratic Defense Foundation. “There is no common roadmap or clear path to lowering.” But if the two countries eventually agree to reduce large-scale taxes (tariffs), they have already slapped each other’s goods, which would mitigate the world’s financial markets and companies that depend on both sides of the Pacific Pacific.
“Neither company engaged in this trade can wait any longer,” said John Gong, an economist at the Beijing University of International Business and Economics. Gong said in the worst case, if China believes that the United States does not view China as equal, or is unwilling to take the first step to expand, then China can get rid of the negotiations.
“I think it could be very difficult if (Bessent) doesn’t use this way of thinking to negotiate,” he said.
For now, the two countries cannot even reach a consensus on those demanding negotiations. “The meeting is expected to be held by the United States. Trump does not agree. They should go back to study the documents,” he said.
Trump’s belief in tariffs is in line with economic reality
It seems clear that Trump’s favorite economic weapon – import tax or tariffs – is not as powerful as he hoped.
“For Trump, what’s going on here finally has to face the economic reality,” said Jeff Moon, a trade official in the Obama administration. “The idea of his surrendering China to tariffs will never work.”
Trump believes tariffs are a universal economic tool that can raise funds for the U.S. Treasury Department, protect the U.S. industry, lure factories on the U.S., and put pressure on other countries to succumb to his will even on issues such as immigration and drug trafficking.
He used tariffs during his first term and the situation of levied them for the second time was more positive and unpredictable. He has imposed 10% tariffs on almost every country in the world, blowing up rules that have managed global trade for decades.
But it is his trade war with China that does put markets and businesses on the edge. It began in February when he announced a 10% import tax on China. By April, Trump raised China’s tax revenue by 145%. Beijing raises its tariffs on U.S. products to 125%.
Trump’s escalation has made financial markets thriving and has caused U.S. retailers to warn that they may run out of goods as U.S.-China trade breaks out. American consumers are worried that the prospect of empty shelves and higher prices is losing confidence in the economy.
“This is not a plan. I don’t think he intends to escalate tariffs into this chaos,” said Zongyuan Zoe Liu, senior researcher at China Studies at the Council on Foreign Relations.
China is ready for a rematch
When Trump reached Chinese imports with tariffs during his first term, he accused Beijing of using unfair tactics, including cyber theft, to give technology companies an advantage.
The two countries held a truce in January 2020 – the so-called Phase I agreement; China agreed to buy more U.S. products, and Trump delayed higher tariffs. But they haven’t solved the big problem of separating them, including subsidies from Chinese local tech companies.
When Trump returns to the White House, China is ready for a rematch. It has been working to reduce its reliance on large-scale U.S. markets, reducing U.S. export share from 19% in 2018 to 15%.
Beijing is confident that the Chinese people are more willing to endure the effects of the trade war than Americans, including drop in exports and closure of factories. “It’s painful for China, but it has to bear it and be prepared to deal with it,” said Sun Yun, director of China Programs at the Stimson Center.
Two ways of dependency
In addition to misunderstanding China’s determination, the Trump administration also underestimated the United States’ dependence on China.
Americans have been relying on Chinese factories for decades. They produce 97% of baby strollers imported from the United States, 96% of their artificial flowers and umbrellas, 95% of fireworks, 93% of children’s coloring books and 90% of combs.
“What do they have to sell without us?” Zheng Zhengren, a Chinese toy maker, told Beijing News. “Their shelves will be empty.”
Shower company Afina reported an experiment last month that showed that American consumers are almost reluctant to pay more for products made in the United States. Afina has filtered shower heads in China and Vietnam, and retails for $129. Making the same product in the United States will increase the price to $239. When there is a choice between customers on the company’s website, 584 choose cheap Asians. No one chose a more cost-effective version of the US.
It is not only consumers who rely on China. The same is true for the U.S. own factory. 47% of the National Manufacturers Association’s imports from China in 2023 are “manufacturing inputs” – industrial supply, auto parts and capital equipment, used by U.S. manufacturers to make other products domestically produced in other products. As a result, Trump’s tariff risks increase costs and reduce supply to U.S. factories, making our factories rely on and making them less competitive.
Louise Loo, a Chinese economist at consulting firm Oxford Economics, said that in recent years, China’s ability to reduce its reliance on the U.S. market means “they are likely to be able to find alternatives to buyers, which are easier to find suppliers than the U.S. side.”
Despite this, China will not break away from the trade war without any loss. The IMF cited the impact of the trade war to lower the outlook for China’s economy this year last month.
“China needs the United States of America,” White House Press Secretary Karoline Leavitt said in a news briefing on Friday. “They need our market. They need our consumer base. Secretary Bessent knows he will continue to go to Switzerland this weekend with his president’s full support, confidence and trust.”
Indeed, Moon, who also worked as a diplomat in China, noted that tariffs have been cut in two ways: “They are both highly dependent on bilateral trade. They put themselves in the corner.”
Jens Eskelund, president of the Chinese European Chamber of Commerce, said U.S. and Chinese officials are meeting.
“Great,” he said, pointing to the Vatican Conference, only picking a new pope as inspiration. “Lock them in a room and hope the white smoke will come out.”
