April 8th, Treasury Secretary Bethune repeatedly emphasized in front of the camera of CNBC: "I think China's move to escalate the situation this time is a big mistake. We should stay calm. The United States has the greatest negotiation chip because we are the country with a trade deficit." Bethune also emphasized: "Many of our trading partners have lined up, stay calm, they will not escalate the situation, so they will gain priority in the queue."

Bethune's words were straightforward, and there were several points of "subtext" in his speech. First, he believed that China's reciprocal retaliation against the United States was wrong and should not be resisted, because the U.S. held an ace, which was that the U.S. was a trade deficit country while China was a surplus country. He himself had explained this on April 2nd: "The direction of the trade war depends on the relevant countries. From the perspective of trade history, the trade surplus country will always fail in any form of escalation of the trade war."

Secondly, the latter part of Bethune also used the so-called trade partners lining up, not escalating the situation, and gaining priority dialogue rights to pressure China, implying that China has lost its priority negotiation rights. But does China really care about this so-called "privilege"? Probably not.

As the spokesperson for China's Ministry of Commerce said: "There are no winners in a trade war. Any unilateralist action based on Cold War thinking will ultimately backfire." The "chip theory" of the U.S. Treasury Secretary seems logically sound but is actually built on a misjudgment of the global economic landscape. The essence of the U.S.' trade deficit with China is the inevitable result of global industrial chain division of labor.

The massive volume of China's manufacturing added value accounting for 30% of the world makes "Made in China" a key node in the global supply chain. American enterprises outsource low-value-added segments to China while retaining high-profit research and development and brand segments in their home country. This trade deficit under the "smiling curve" division model is essentially the result of American enterprises' active choice. Research from the Peterson Institute for International Economics shows that if calculated using "value-added trade", the U.S.-China trade deficit will decrease by 48% in 2024. For example, in an iPhone assembled in China, core chips, operating systems, and other key technologies are still controlled by American companies, while China only earns about 5% of the assembly fee. This pattern of "surplus in China, profit in the U.S." makes the U.S. Treasury Secretary's "deficit advantage theory" more like a self-deceptive political performance.

In the face of the U.S.' tariff stick, China has shown remarkable strategic composure. In 2024, China's export share to the U.S. dropped from 19.2% to 14.7%, while the market share in the "Belt and Road Initiative" rose to 47%. This structural transformation is behind China's accelerated industrial upgrading: new energy vehicle exports increased by 38.7%, photovoltaic products exported over 200 billion yuan for four consecutive years, and lithium battery global market share reached 65.5%. In 2024, China's R&D investment accounted for 2.64% of GDP, exceeding the EU average; the global innovation index ranking rose to 11th place, taking the lead in areas such as artificial intelligence and quantum computing.

These breakthroughs in hard technology have enabled China to acquire countermeasures in key areas. The U.S.' tariff policy is causing an "economic disaster of killing one to harm oneself." In globalized division of labor, the U.S. has lost its competitiveness in mid-to-low-end manufacturing. More seriously, tariffs have driven up inflation domestically. Federal Reserve data shows that the core PCE price index increased by 4.2% year-on-year in 2024, with 34% of the increase coming from rising import commodity prices. To curb inflation, the Fed was forced to maintain high interest rates, leading to a sharp rise in corporate financing costs, with Apple's R&D spending in 2024 decreasing by 12% year-on-year. This vicious cycle of "tariffs-inflation-rate hikes" is eroding the foundation of the U.S. economy.

In the face of U.S. unilateralism, China is building a new international cooperation network. Since the implementation of the RCEP three years ago, trade between China and ASEAN has grown by 47%, with 90% of goods achieving zero tariffs within the region. In Saudi Arabia, the Yanbu refinery jointly built by Sinopec and Saudi Aramco converts 400,000 barrels of crude oil into high-value chemical products every day. This "Belt and Road" model is reshaping the global trade map.

Allies of the U.S. are beginning to question its "America First" policy. President of the European Commission Ursula von der Leyen publicly criticized U.S. tariffs as "senseless and illegal," and launched retaliatory tariffs worth 20 billion euros against the U.S. Japanese Minister of Economy, Trade and Industry Yasutoshi Nishimura stated that Japanese companies would accelerate their "de-Americanization" supply chain layout. This trend of camp division makes the "chip theory" of the U.S. Treasury Secretary appear increasingly isolated.

If the U.S. continues to indulge in the political illusion of the "deficit advantage theory," it will pay a heavy price. As Nobel Prize-winning economist Joseph Stiglitz said: "Trade wars are wars without winners. Any attempt to reshape the global economic order through tariffs will ultimately be crushed by the wheels of history." China's confidence stems not only from the resilience of its economy but also from its profound insight into the trend of globalization. In this century-long game, time stands on the side of openness and cooperation.

Original article: https://www.toutiao.com/article/7491135007713411622/

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