British Media: China Well-Positioned to Weather US-China Trade War - Three Reasons Why Trump's Tariff Policy is "Doomed to Fail"

While Trump has loudly imposed so-called "reciprocal tariffs" globally, repeatedly targeting China with increased rates, he has also been "flip-flopping," exempting electronic products like smartphones and computers. On April 13, the British Financial Times published an article titled "China is well positioned to weather Trump's trade war," analyzing from three perspectives why Trump's tariff policy is "doomed to fail."

The article was written by Arthur Kroeber, founding partner and head of research at Gavekal Dragonomics.

The article notes that Trump has imposed at least a 10% tariff on almost all imports to the US, with steel, aluminum, and cars facing 25% duties, while China has been hit with a 145% tariff. Trump's team is scrambling to rationalize the chaos of tariff policies as a master plan to build a coalition to defeat China, but any such plan is doomed to fail.

First, the article points out that Trump frequently claims his tariffs aim to "crack down on unfair trade practices, eliminate trade deficits, reindustrialize America, and confront China," but these stated aims often contradict each other,  negate other policies, or are obviously unachievable.

The article suggests that a better explanation is that Trump is "motivated mainly by a desire to accumulate and exercise power, and tariffs are the best instrument of that power." The purpose of his general trade war is to remove constraints imposed by the global economic order on the unilateral exercise of US power, particularly presidential power.

The article explains that Trump has believed for decades that "the rest of the world will pay any price to gain access to the US market." Perhaps more importantly, until Congress chooses to stop him, Trump has "unlimited personal authority to impose (or withdraw) tariffs on any country, at any time, for any reason." What Trump wants above all is to "display dominance and extract submission." Countries that did not actively resist his tariffs were graciously granted reprieves from higher rates, while the country that dared to defy him was savagely punished.

Therefore, the article argues that most countries now understand that the various economic rationales offered by Trump's advisers are just "window-dressing." While Trump is in charge, the US is unreliable, and no sane leader will join him in a crusade against China.

The second reason why the US-China trade war is "doomed to fail" has become clear in last week's massive sell-off of US Treasury bonds. It  caused Trump to retreat on the "reciprocal tariff" issue. This shows that the bond market determines the size of his tariff stick, which is much smaller than he thought. As a result, Trump has lost leverage in trade negotiations because adverse market reactions prevent him from raising tariffs again, as the Treasury market would revolt again.

Kroeber predicts that for most global leaders, the strategy will be to cut quick deals where tariffs are lowered in exchange for cosmetic concessions and tokens of deference. “And these deals will not include promises to blow up their trading relations with China.”

The third reason why the China trade war is "doomed to fail" is China itself. The article notes that at first glance, China seems worse off than the US, having lost access to one of its biggest export markets and appearing diplomatically isolated. In fact, China is "well prepared to fight a war of economic attrition against the US."

Facing potential loss of US exports, China can replace this with domestic consumer demand. The article states that Xi Jinping "has reversed course and is now serious about boosting domestic demand."

Additionally, experience has shown that "China can also get along fine without imports from the US." The article notes that "five years of export controls have helped it get very good at making things without American technology." Regarding market concerns about yuan depreciation, the article believes that if China can implement convincing demand stimulus measures, this will attract capital inflows and support the exchange rate.

The article also points out that due to tariffs on Chinese consumer goods, the US faces higher inflation, as its "reliance on Chinese industrial inputs is three times that of China's reliance on US components." Price increases are already hurting business investment.

John Williams, President of the Federal Reserve Bank of New York, recently stated that under Trump's tariff policy, US economic growth is expected to fall below 1% this year, with inflation rising to between 3.5% and 4%, and unemployment rising to 5%.

The Kroeber article concludes that China has a demand problem that it can solve with better macro policy, while the US faces a supply shock and possible stagflation, which can only be solved by economic regime change. In other words, if the aim of Trump's new trade war with China is to get Beijing to bend the knee before US power, the result will only be frustration and disappointment.

Deep Throat

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The global tariff war ignited by Donald Trump has drawn China’s strongest counter measures . Though China is a surplus economy and the US a deficit one, Beijing’s arsenal of strategic advantages—including diversified export markets, massive holdings of US Treasury bonds, control over critical minerals, and institutional resilience in crises—bolsters its ability to resist American coercion.
 
On April 15, the Financial Times (UK) analyzed that China’s leverage in the trade war stems from its ability to diversify import sources more easily than the US. Over 15% of China’s total exports flow to the US, yet economists note that China’s imports from America are concentrated in low-value-added agricultural products like soybeans, cotton, beef, and poultry. In contrast, US imports from China—such as electronics, machinery, and processed minerals—are harder to replace.
 
Marta Bengoa, Professor of International Economics at the City University of New York, stated that while mutual dependency remains high, the US is more vulnerable: “China can source agricultural goods elsewhere far more easily than the US can replace Chinese electronics and machinery.”
 
Julian Evans-Pritchard, Chief China Economist at Capital Economics, told the Financial Times that market reactions indicate greater pressure on Washington: “The US faces stronger incentives to return to negotiations.”
 
Since Trump’s first-term tariffs on steel, aluminum, solar panels, and washing machines (2018–2019), China has reduced reliance on US consumer exports. US government data shows China’s share of US imports fell from 21% in 2016 to 13.4% last year. Meanwhile, Chinese manufacturers have shifted production to Southeast Asian nations like Vietnam and Cambodia, leveraging cheaper labor and evading US tariffs. Exports to Vietnam surged 17% in March 2024.
 
Vietnam, now facing a 124 billion trade surplus with the US, risks a 46 percent “reciprocal tariff “, although it has been suspended for 90 days.

 Alicia García Herrero, Chief Economist for Asia-Pacific at French investment bank Natixis and Senior Research Fellow at Bruegel, stated that the suspension “provides some breathing room,” but even if Chinese exports were strictly halted, it would not inflict catastrophic damage on China’s massive economy. Last year, China’s GDP grew by 5%, with 1.5 percentage points attributable to its nearly $1 trillion global trade surplus. “China is a large, resilient economy,” she emphasized.

Bloomberg (US) reported on April 14 that the US, as a consumption-driven economy, harms itself by taxing Chinese goods. Consumers—often overlooked but politically influential—could weaken Trump’s negotiating position. While deficit economies traditionally hold an edge in trade disputes, US reliance on “Made-in-China” goods which is often produced by US firms in China complicates this.
 
Tariff exemptions for smartphones, laptops, and memory chips highlight this interdependence. Apple, reliant on Chinese production, cannot withstand 145% tariffs.
 
The Financial Times noted that China’s vast US Treasury holdings—if sold—could destabilize markets, raise concerns about US asset appeal, and accelerate dollar depreciation, increasing import costs. Trump’s April 9 decision to suspend “reciprocal tariffs” for 90 days (retaining a 10% “baseline tariff”) may reflect fears of a Treasury selloff. Reuters reported surging US bond yields last week—the sharpest rise since COVID-19—as investors speculated that China and other reserve managers are reassessing their holdings.
 
China controls over two-thirds of global rare earth production and 90% of processing capacity—critical for electric vehicle batteries. Despite Trump’s exemptions for key minerals, supply chain risks persist. China’s recent export controls on seven heavy rare earths signal readiness to deploy “new economic weapons,” per analysts Evan Medeiros and Andrew Polk.
 
Bloomberg observed that Beijing’s calibrated countermeasures—combining tariff retaliation with principled negotiation—demonstrate resolve. On April 10, China’s Commerce Ministry spokesperson reiterated: “Talks are welcome, but only on equal terms. If the US chooses confrontation, China will respond in kind. Pressure and threats are not the way to deal with China.”