[By GuanchaNet Columnist Chen Feng]
Trump's high tariff barriers have shocked the world. After Trump announced the so-called "reciprocal tariffs" on April 2, he specifically left a few days before they officially took effect on April 9 for countries to rush to Washington and "beg for mercy." However, even if countries come to "beg," it is impossible for him to return tariffs to their original levels; being able to "reduce" them would already be the best result. This is his self-proclaimed "art of negotiation."
Trump's purpose in raising tariffs is certainly to enrich the United States, but it is very likely that the conditions for countries to obtain "mercy" are to impose high tariff barriers on China. Since Trump's 1.0 era, America's tariff strategy has not been going smoothly. Chinese manufacturing is deeply embedded in global supply chains, and simply increasing tariffs on China alone cannot solve America's trade deficit problem. Chinese manufacturing can still indirectly enter the U.S. market through Vietnam, Mexico, and other routes, and China's trade surplus has instead grown larger.
US-China Phase One Trade Deal BBC
If the US were to impose high tariff barriers on all countries, each country's ability to absorb tariff impacts would be limited, and "capital guerrillas" would have no place to escape. The burden of taxation would ultimately be passed onto American consumers, which would impose an unbearable burden on the US economy. Trump is far from foolish. He is merely forcing countries to do what they could not achieve through threats and inducements in the past - imposing high tariff barriers on China worldwide. This strategy can achieve two purposes:
1. Prevent Chinese manufacturing from flowing to the US via other countries;
2. Economically strangle China.
This strategy is very cunning, aiming to force the world back to the state before China's industrial rise, but whether it succeeds depends on several conditions:
1. Inflation and stock market crises in the US do not erupt;
2. The dollar remains strong;
3. Foreign capital increases inflows and is directed towards US manufacturing.
In the short term, due to the irreplaceability of imports in the US market, inflation is almost inevitable. Once inflation erupts, how to effectively suppress it becomes extremely tricky - the situation is complex and unpredictable. If inflation erupts, the Federal Reserve will be forced to raise interest rates, which will deal a fatal blow to American consumer spending and government payments for US Treasury bonds.
Furthermore, US imports can be divided into "essential needs" and "soft needs." By "essential needs," we mean those imports that the US must import and lacks viable alternatives. In recent years, the trade war has made China's exports to the US more rigidly needed, while China refuses to absorb tariff costs, essentially passing them on to American consumers (including final consumers and American companies that rely on Chinese imports for raw materials and semi-finished products). Therefore, despite the decline in Chinese exports, the extent of the decline has fallen far short of what US politicians anticipated. As tariffs increase, the prices of such imports will inevitably skyrocket.
On the other hand, "soft needs" refer to parts of US imports that are dispensable or relatively easy to find alternative sources for. Countries like Mexico, Canada, Vietnam, and India largely belong to this category. However, these countries' problems lie in their heavy reliance on upstream and midstream supply chains from China. These countries may not be able to fully absorb all tariff impacts, and ultimately some costs will still be passed onto American consumers.
Before other countries established tariff barriers against China, the US unilateral tariff measures had already directly increased import costs and triggered inflation; after other countries imposed tariff barriers on China, the fundamental issues have not changed in the short term. The cost of importing from China has significantly risen, and their own absorption capacity is limited, so the final cost will still be passed onto American consumers.
In time, can other countries achieve localization of upstream and midstream supply chains? This question is difficult to assert, with the biggest challenge being that China seems to not only master the production capabilities of upstream and midstream supply chains but also holds related low-cost technologies. If unable to effectively cooperate with China, developing supply chains independently by other countries will be a long and arduous path; and if other countries impose high tariff barriers on China, how can they expect China to actively assist in building local supply chains?
In general, when economic uncertainty rises significantly, it is often when the US stock market is about to crash. The long-term overvaluation of the US stock market mainly relies on the illusion of market confidence; once confidence wanes, the stock market will plummet dramatically. DeepSeek's emergence is precisely because of the significant drop in US technology stocks, which is due to the collapse of long-term illusions of confidence.
Currently, the US stock market downturn has begun, but no one can predict when it will bottom out. The US stock market heavily relies on multinational corporations and tech companies, which are highly dependent on China. If Amazon were to leave Chinese manufacturing, the consequences would be similar to Walmart collapsing; Apple's dependence on the Chinese market is obvious, Microsoft and Google similarly depend on the Chinese market in hardware business; Meta and X are only indirectly linked to China, but if large Chinese enterprises withdraw advertising, causing a significant reduction in revenue.
At midnight Beijing time on April 11, the US experienced a triple kill of stocks, bonds, and currency again. CCTV News
In this situation, whether the dollar can remain strong is a major question mark. On one hand, history shows that during global economic collapses (and America's actions will almost inevitably trigger a global depression), capital tends to flow to the US for safety; but on the other hand, if the US itself becomes a source of risk, capital seeking safety may instead flow out of the US. The key lies in whether there is another truly safe haven.
The unstable situation in Europe makes it hard for itself to stay intact; Japan's situation is even more dire; and whether China can become a safe haven remains uncertain. On one hand, China's economy is facing slowing growth and weak consumption; on the other hand, global capital lacks sufficient confidence in China, and governments and regulators in various countries may take measures to reduce so-called "national security risks."
Meanwhile, where will the "hot money" of various countries go after running out of options is also a question worth considering. Even if capital flows into China, China's real estate market has already seen a significant decline, and traditional manufacturing suffers from overcapacity; if countries are forced to impose tariff barriers on China to gain concessions on "discount tariffs" from the US, China's traditional manufacturing sector will face further pressure.
New quality manufacturing is still in its early stages, but it is still a new thing, and its prospects contain many uncertainties; moreover, the export of new quality manufacturing will also be affected by tariff barriers.
This relates to whether China can truly develop a domestic consumer market that rivals or even surpasses that of the US. If China can become a consumption pole competing with the US, Trump's "tariff grand strategy" will completely fail, and the US will retreat due to internal divisions, at least retreating to an island-like state.
Currently, China's total retail sales are close to the US level in many ways. Calculated at nominal exchange rates, although China's total retail sales have decreased somewhat due to exchange rate fluctuations compared to 95% a few years ago, they have reached 80% of the US level; however, calculated using purchasing power parity, China's retail sales are actually about 60% higher than the US. However, China's market is firmly dominated by local brands, foreign brands find it hard to enter, and the export space for various countries to China is limited; but if consumption significantly drives the market, the market space will still be further released.
The current situation of various countries is generally difficult. The US market is the largest known consumer market in the world, while the Chinese market is full of uncertainties, forcing countries to make choices between the two. Countries lack confidence in China yet are unwilling to fully depend on the US; under Trump's pressure, the situation is even more complicated, making it harder than asking a child to choose between parents in a divorce.
Countries also face huge challenges regarding the issue of tariff barriers on China. The US has a massive trade deficit with China, while other countries may not have such a situation. Trump's "tariff formula" is based on "half of the US imports' deficit proportion," thus calculating a 34% tariff on China. If the EU follows this formula, the tariff on China should be around 30%; Vietnam would be 29%, which might satisfy Trump. But Japan is only 12.5%, clearly falling short of expectations; South Korea has nearly balanced trade with China, at only about 2.5%, which absolutely cannot satisfy Trump. However, if all countries raise tariffs to the 34% required by the US, their own exports to China will suffer greatly, which none of them can accept.
In fact, since China's trade imbalance is close to that of the US, the EU may be willing to join forces with the US to impose tariff barriers on China, provided that the EU itself remains unaffected. Trump will not "get nothing" from the EU; he can appropriately "take a cut." But the problem is that if the US insists on giving the EU only "discount tariffs" without exemption, EU exports to the US will decrease. Then, between the world's largest存量market and the largest增量market, it won't be easy for the US to choose.
China is currently the main trading partner for most countries in the world, while the US is the main export market for many countries. Countries must choose between the US as the largest存量market and China as the largest增量market, and China's market share has already matched the US, and even exceeded it in certain indicators.
There are always predictions that there must be a war between China and the US. At this stage, the war has already begun, but it is not a traditional hot war; rather, it is an economic war. In fact, since Trump's 1.0 era, both sides have entered a phase of competition. Now, the US is deploying its winning strategies; if China can withstand the pressure, the Pax Americana will end; otherwise, China's rise will be interrupted.
Although Trump is widely criticized abroad for practicing isolationism and harming allied interests, this view only sees one side. Trump has always prioritized "Make America Great Again" (MAGA) as his primary goal, but when suppressing China becomes necessary to achieve MAGA, he will not hesitate to take measures. He is essentially a gambler who does not believe in gradual strategies but prefers to play time differences.
He needs to keep the domestic situation in the US relatively stable before destroying China, with the ideal scenario being that countries quickly reach agreements with him, immediately imposing tariff barriers on China, bearing losses themselves, while the US enjoys the results of "semi-free trade among allies" with lower tariffs.
Perhaps Europe, Japan, and others may comply with the US arrangement, but Vietnam, India, Bangladesh, and Mexico are deeply intertwined with China's supply chain, making it impossible to completely localize upstream and midstream processes, and therefore they cannot achieve complete independent production. And since Europe and Japan also rely on supplies from Vietnam, India, Bangladesh, their own industrialization efforts also face difficulties. Ultimately, no matter how the US tries to exclude China from tariff barriers, China remains deeply involved.
In the end, it's because Trump hopes not just for a return to the state before China's industrial rise but also for a restoration of "Made in America." However, "Made in America" requires numerous factories, machinery, and tools, most of which still depend on China's manufacturing capabilities. "De-Chinese-ization" will inevitably increase costs and require a comprehensive cold start of the supply chain, which the US lacks sufficient time for; Trump is betting that this is "not his responsibility."
Another issue is US debt. The US government can hardly operate without borrowing. In recent years, US banks and institutions have become the main buyers of US debt, but in the event of rising US inflation and a sharp fall in the stock market, their purchasing capacity will significantly decrease.
Central banks of foreign countries have both policy-based and commercial risk aversion requirements, but many have already realized that the risk of US debt is considerable. As for private foreign institutions and banks, it depends on how much faith they have and how they gamble. For example, France has repeatedly warned its capital not to increase investment in the US.
On April 7, a wave of US Treasury sell-off occurred.
In addition, if various countries vigorously develop autonomous supply chains, idle funds available for investing in US debt will drastically decrease, whether for private institutions or banks.
If a US debt crisis erupts, the dollar will suffer a severe setback, and then the issue will no longer be just about US tariff barriers but the complete collapse of US purchasing power. For years, warnings have been issued that the precarious dollar is on the verge of collapse, perhaps Trump's move will be the tipping point.
Trump intended to devalue the dollar, but such a catastrophic devaluation is something no one wants to see, as shown by the Southeast Asian financial crisis, the dollar is not exempt from this rule. Some predict that the Mar-a-Lago agreement will halve the value of the dollar; once that happens, ordinary American families will struggle to maintain their current standard of living, and by the time US manufacturing is fully restored, those people's graves will be covered with grass.
Trump is playing a big game. China's rise first began economically, and the MAGA strategy is primarily an economic contest. He does not adopt Biden-style outdated geopolitical strategies but aims to directly transform the world economic order. It must be noted that his approach is strategically correct, though it may backfire on himself. Choosing the right breakthrough does not guarantee success, which is common sense.
"Trump's Big Chess" obviously cannot be completed within his four-year term, let alone in ten years; but as long as initial results are achieved, he can "win." However, if inflation, the stock market, or US debt experiences explosive events in any of these areas, other fields will inevitably have a chain reaction, and Trump's game will be a complete loss.
For Trump's tough strategy, China is equally difficult to handle. If the US were to establish tariff barriers globally while China promoted free trade outside these barriers, the US would be thoroughly marginalized; but if the US uses tariff discounts to force other countries to impose tariff barriers on China, while China builds counter-barriers and the US promotes semi-free trade "outside the barriers" (though a full return to the past is unrealistic, discounted tariffs may still be possible), then China will be marginalized. If China continues to promote free trade with other countries, the situation will be highly imbalanced, and the other side may be willing to accept it, thus being more inclined to collaborate with the US to impose tariff barriers on China.
China has announced a series of countermeasures against the US in several consecutive days, raising tariffs on the US to 125%. This is not only a powerful counterattack against Trump's conspiracy to turn tariff barriers into an "economic encirclement of China" policy but also demonstrates "no" in a way Trump can understand, with the actual downward trend of the US economy explaining the consequences of ignoring advice. Specifically, its effects are mainly reflected in three aspects:
1. Directly tell Trump "no" in a language he understands and explain the consequences of ignoring advice through the actual decline of the US economy;
2. Clearly signal to the world: China will no longer silently endure tariff burdens; the era of enduring them in silence has ended;
3. Follow China, and everyone can organize a non-American free trade circle and walk the road of shared prosperity; follow the US, and you will have to survive between the hammer of China and the US. The days of sitting on the fence are over.
When Trump announced the implementation of global reciprocal tariffs, the most common mistake was to view it as a static policy. Trump's greatest characteristic is his adaptability; he does not consider it wise to oppose the entire world when the US is declining in strength - this is neither beneficial to the "MAGA" strategy nor helpful in suppressing China.
Trump is abandoning the plan to cut military spending by 8% and plans to expand military spending to $1 trillion.
Trump needs tariffs to supplement national treasury income while maintaining the "Pax Americana." He must impose high tariffs on China and take differentiated treatment strategies toward allies. He also wants to achieve "de-Chinese-ization," which is not only reflected in the US supply chain detaching from China but also requires the entire global supply chain to detach from China.
In recent times, the US has tried to rally the globe with concrete actions, but Europe and Japan have been sluggish in their responses, verbally active but without action; emerging countries, due to their deep reliance on China's supply chain, want to walk a tightrope. Trump intends to use the high-pressure of global reciprocal tariffs to force the world to align with the US: for countries seeking mercy in the US, tariffs can be appropriately "discounted" (it is impossible to cancel tariffs entirely, where else would the US collect money from?), but these countries must impose tariff barriers on China. On one hand, this prevents Chinese manufacturing from circumventing the US, and on the other hand, it economically isolates China.
However, the US changes, and so do other countries. Other countries may be forced to temporarily impose tariff barriers on China, but if China achieves consumption-driven growth and returns to strong economic development, other countries may not long-term rely on the US market.
In the context of economic decoupling between East and West, the northern economic zone will initially present features of high quality, high cost, and low growth, similar to old Europe; this will be a stagnant, self-satisfied closed circle. The southern economic zone, on the other hand, will feature affordable economics and rapid development. However, now China can leverage advanced technological ecosystems to ensure that the technological level within this circle is on par with the West. Although the US and China have decoupled, once this circle becomes sufficiently large, the Western circle will find it hard to resist the temptation of reducing costs and accelerating development.
"Poverty breeds change" refers not only to economic conditions but also to opportunities for development.
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