Can the Trump administration win its trade war against China?

San José, CA – Can the Trump administration win its trade war with China? This question is coming up more and more. On one hand, the Trump administration uses simple math to argue that the United States has the upper hand. Their logic is that since the United States has a large trade deficit with China in goods – that is the United States buys a lot more, almost $300 billion more from China in 2024, than China buys from the United States – then tariffs can reduce China’s exports a lot more than China can reduce U.S. exports.

On the other hand, China does not accept this. China was fairly restrained in responding to the first two 10% tariffs leveled by the United States. But once the United States kept raising tariffs, China responded in kind, eventually raising their tariffs to 125% on U.S. items. China stands ready to begin negotiations with the appointment of a chief trade negotiator, Li Chenggang, who was China’s chief negotiator at the World Trade Organization.

China has been actively increasing its domestic market to rely less on trade for the last 15 years. Further China has expanded trade with other nations to reduce the percentage of exports going to the United States. 25 years ago, China was the leading trade partner to less than 20 countries, all in Asia, Africa and Cuba. Last year it was the United States that was the leading trade partner to less than 40 of the 190 countries and regions of the world, almost all in the Americas and Europe. China was the leader in trade with almost all developing countries and even led in trade to U.S. military allies such as Japan and South Korea.

Another thing would be to look at the details of who buys what in the China/U.S. trade relationship. The single largest product that China buys from the United States is soybeans, which China can buy from other countries such as Brazil. The same goes for the second largest products, oil and gas, which China can buy from many other countries such as Russia, Saudi Arabia, Iraq and Oman.

On the other hand, Chinese machines are the single largest item bought by the United States – not consumer goods as many people think. While the United States does have other sources of machinery, to import more from Mexico, Japan, Canada and Germany would still cost significantly more, as Trump has tariffed all these countries. The second biggest U.S. import from China is nuclear reactor equipment. Russia is a leading exporter in this field, but U.S. sanctions prevent buying from them anymore.

In particular, the United States (and the rest of the world) relies on China as a source of so-called “rare earth” metals – which are not really that rare. While deposits of these rare earths are widespread, China has a near monopoly on (92%) the processing of these metals from their ores. China’s rare earth processing is dominated by state-owned enterprises or SOEs. One of the roles of SOEs in China’s socialist economy is to have lower profit margins in order to provide raw materials at lower prices, which benefits China’s manufacturing industries.

China has begun to restrict the exports of rare earth metals and magnets made from them to the United States. These are used in both military and industrial processes and could impact both the U.S. war machine as well and companies manufacturing MRIs and automobiles, as well as other industries. While the United States does have its own rare earth mines, it would take years to develop processing facilities, and China also has the most advanced technology for processing rare earth ores.

China recently stopped its airlines from taking deliveries of Boeing jetliners. This is a blow at one of America’s giant corporations, which has been weakened by a series of accidents. While many of the commercial jets in China are Boeings, China has been moving away from Boeing for years and now flies more Airbuses than Boeing airliners. Further, Airbus has an assembly plant in China, whereas Boeing does not.

China also has a new Comac C919 airliner. It is a narrow body airliner like some of the Boeing 737 or Airbus A320 airliners. While it does rely on some U.S.-made parts, it can still import these parts – at least for now. But even if the U.S. expands its sanctions to commercial airliner parts, this will lead to China accelerating its manufacturing of substitute parts.

Finally, China has a resource that the United States doesn’t even have – the world’s longest high-speed rail system in the world. In fact, half of the world’s high speed rail tracks are in China. So even if the U.S. managed to somehow shut down China’s supply of planes, people could still take the train.

Last but not least are the two economic systems involved. Trump’s Secretary of the Treasury, billionaire Scott Bessent, said in reaction to China matching Trump’s tariffs, “they’re playing with a pair of twos.” This gaming mentality is common on Wall Street where Bessent ran a hedge fund, and represents the outlook of finance capital, a feature of monopoly capitalism.

On the other hand, China is a socialist society, and rather than gambling on a trade war, China has a long-term plan. “Made in China 2025”, adopted by the Chinese government ten years ago in 2015, was their guide to changing from being the world’s factory based on low labor costs to competing or leading in higher-technology industries. In an article by the American business news source Bloomberg, China was said to lead the world in five industries: drones, electric vehicles and lithium batteries, graphene (high-tech carbon), high speed rail, and solar panels. The success of the Chinese electric cars is seen in Chinese BYD vehicles passing Tesla.

In most of the other areas, including ship building, pharmaceuticals, agricultural machinery, machine tools, robotics, artificial intelligence (Deepseek) and semiconductors, Chinese products are competitive. Only in one industry, commercial airlines, is China still behind world leaders such as Airbus and Boeing. Because of China’s advances the Trump administration is limiting AI chip exports and is developing plans for tariffs on Chinese ships, pharmaceuticals, cell phones and computers (the last two would be general, not just levied on Chinese goods).

So, while China is looking to and making its way to the industries of the future, Trump wants to return to the past, extolling 19th century industries like iron and coal and gambling on a trade war.

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Source: https://fightbacknews.org/can-the-trump-administration-win-its-trade-war-against-china?pk_campaign=rss-feed