U.S. President Donald Trump earlier announced that the U.S. would exempt smartphones and consumer electronics from tariffs, but on Sunday he made a confusing clarification, insisting that "no one can 'escape responsibility'." This exemption itself changed last week's policy, when it was announced that a 145% "reciprocal" tariff would be imposed on all goods from China -- that news itself significantly raised the rates announced just days before. Do you understand?

A regular observer might think that all these sudden adjustments in tariff policies are evidence of chaos at the White House. Trump's fans don't think so. Financier Bill Ackman praised the previous sharp turn as "perfectly executing... textbook-level 'The Art of the Deal'".

The most ardent supporters of the president still insist that he is a great strategist. Those who disagree may be accused of having "blind anti-Trump syndrome". Unfortunately, I seem to have this problem too.

This fervent mind of mine thinks that in the tariff poker game with China, Trump's situation seems far worse than he imagined. The longer it takes for him to accept this fact, the greater the loss will be for him and for the United States.

Trump and his trade warriors initially assumed that China was automatically at a disadvantage in the tariff conflict. U.S. Treasury Secretary Scott Bessent believed that "our exports to them are only one-fifth of their exports to us, so they are bound to lose."

Adam Posen, director of the Peterson Institute for International Economics, recently explained the logical flaw in Trump and Bessent's reasoning in an article published in Foreign Affairs magazine. As Posen pointed out, the fact that China's exports to the U.S. far exceed U.S. exports to China is actually China's leverage rather than its weakness.

The U.S. buys Chinese products not out of charity. Americans want what China produces. Therefore, if the prices of these products rise significantly -- or disappear completely from the shelves -- Americans will suffer.

The significance of the smartphone-related troubles lies in the fact that Trump has finally had to admit the reality he has been denying -- tariffs are paid by importers, not exporters.

More than half of the smartphones sold in the U.S. are iPhones, and 80% of those are manufactured in China. If the price increases more than double, Americans will complain bitterly. "Liberation Day" does not mean getting rid of their smartphones.

Smartphones and computer equipment are the most obvious options for concessions. They are not isolated cases. Trump will have to hope that this year isn't too hot, because about 80% of air conditioners and three-quarters of electric fans imported into the U.S. are made in China.

Can all these things be manufactured in the U.S.? It's not impossible, but building new factories takes time, and the end products will be more expensive.

Trump dislikes negative news and wants them to disappear. Therefore, he is likely to add more goods to the tariff-exempt list instead of enduring shortages and inflation.

In this case, China can act opportunistically. But if Beijing decides to take a tough stance, it can use some truly powerful means. Nearly 50% of the raw materials for antibiotics Americans rely on are produced in China. China is also the second-largest overseas holder of U.S. Treasury bonds -- which may be important in times of market pressure.

The U.S. market accounts for only about 14% of China's exports. Joerg Wuttke, former chairman of the European Union Chamber of Commerce in China, believes that the U.S. tariffs are "troublesome but do not pose a threat to China's economy".

China has long been preparing for a trade showdown with the U.S. and has carefully considered its options. By contrast, the White House operates step by step.

Trump has put himself in an unfavorable position. He will have to admit defeat sooner or later. (Translated/By Ge Xuelai)

This article was originally published on the Financial Times website on April 14th, with the original title "Why China's Leader Has an Advantage Over Trump", written by Gideon Rachman.

Original source: https://www.toutiao.com/article/7493812729690554917/

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