Jianlu BiThe recent China-US trade deal, if it marks the end of the American approach, concludes a journey that has been widely considered illogical.
The Trump administration’s tactics, from initially targeting nations with trade deficits to later penalising retaliators, often undermined its stated aims, and, at times, even appear to favour Beijing over steadfast allies.
The current significant tariff reduction, driven by mounting domestic costs rather than Chinese concessions, reveals the limits of American economic pain tolerance and the irony of tariffs underscoring the very dependence they aimed to address.
China – the world’s second-largest economy after the US – emerged from these interactions visibly unperturbed, its geopolitical standing arguably enhanced.
Sebastian Contin Trillo-Figueroa, a Hong Kong-based geopolitical strategist, posits that "the real significance lies, therefore, in the performative dimension of power projection,” potentially outweighing immediate economic gains.
China's firm stance against US tariff threats isn't mere rhetoric; it's rooted in a deep-seated belief that appeasement invites further aggression.
As Beijing itself stated, "kneeling only invites more bullying," a lesson they perceive as being starkly illustrated by historical instances of US economic pressure on Japan, ranging from forced export limitations and demands for market opening to the impactful Plaza Accord, which many in Japan believe contributed to their subsequent economic stagnation.
A global player
China's burgeoning economic independence underpins its resolve.
No longer solely reliant on the US market, its vast domestic demand and expanding global partnerships offer a robust buffer against unilateral pressure.
Attempts to decouple have ironically spurred Chinese innovation and self-reliance. This economic strength, coupled with a firm belief in its own developmental trajectory, empowers China to stand firm.
While this picture of resilience is strong, the trade tensions didn't leave China entirely unscathed. Chinese export growth to the US did see periods of contraction, and some industries faced pressure to diversify their supply chains away from the US market, leading to adjustments and re-strategising within Chinese businesses.
The US President has taken a hawkish stand on the bloc. Who will blink first?
Furthermore, despite its firm stance, a degree of economic interdependence still exists, and a complete "decoupling" remains a complex and potentially costly endeavour for both nations.
The broader global economic slowdown, exacerbated in part by the trade disputes, presented challenges for China's growth trajectory, even as it sought to bolster domestic demand and alternative trade relationships.
Nevertheless, trade figures for April reveal that despite headwinds from the US tariff war, China's overall exports have continued to expand, driven by strong growth in its trade with other key partners like ASEAN and the European Union.
The illusion that tariffs can force Beijing to its knees ignores both history and its growing global influence, ultimately revealing more about US anxieties.
Even as the US pursued its tariff strategy, China's leadership was far from passive.
Recognising the escalating tensions and the inherent challenges of a trade war, Beijing had long anticipated and prepared for a protracted struggle.
In April, China signalled a strategic alignment of domestic economic management with the unfolding international trade conflicts, emphasising "bottom-line thinking" and comprehensive contingency planning.
Lopsided strategy
The consequences of the US strategy, however, underscore the limitations of a flawed policy and expose its own economic vulnerabilities.
The retreat on tariffs, explicitly driven by concerns over “empty shelves, plunging container traffic and small-business failures,” reveals the US economy’s sensitivity to trade disruptions with China.
The initial market jitters following tariff announcements further highlight this fragility.
The very dependence on China, long flagged as a national security concern, is precisely what renders any decoupling attempt, even one induced by tariffs, so economically painful for the US.
The fact that domestic economic pressures ultimately necessitated a significant tariff reduction showcases the finite limit of American economic pain tolerance in pursuing trade objectives.
This suggests a constraint on the US’s ability to leverage tariffs as a coercive tool, dictated by its deep economic interconnectedness with China.
Moreover, by prioritising a “performative dimension of power projection” and potentially alienating allies, the US risks undermining its long-term geopolitical standing for short-term economic posturing.
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The inaction of other major global players like the EU and India, as noted, inadvertently reinforces the US-China bipolar dynamic, potentially hindering Washington’s ability to forge a unified front against Beijing on trade or other critical issues.
Ultimately, the recent trajectory suggests that the US’s aggressive tariff tactics have fallen short of their intended goals of extracting significant concessions from China and have instead illuminated the delicate balance and profound interdependence that define the US-China economic relationship.
The tariff reduction signals a recognition of these vulnerabilities and a potential pivot towards a more pragmatic, albeit still competitive, engagement.
A genuine commitment to sincere dialogue and negotiation with China, acknowledging mutual interests and the interconnected nature of the global economy, is the only viable path forward.
Only through respectful engagement can the US hope to foster a stable and mutually beneficial relationship, moving beyond the illusion of leverage and towards a more prosperous and predictable future for all.
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