If US manages to leverage the rest of the world to close off their markets to China, this could be the downfall of Xi Jinping
By Benedict Rogers in The Telegraph
President Trump’s manic unleashing of tariffs on friend and foe alike earlier this week caused panic in the markets and plunged the world into chaos.
But his decision yesterday to pause tariffs at 10 per cent on all other countries, for 90 days, and to escalate tariffs on China to 125 per cent, changes the picture.
The markets have rebounded, and the trade war has moved from indiscriminate and global to a targeted focus on China.
Of course any trade war between the world’s two largest economic superpowers will have implications for everyone else. Global markets are so intertwined with both the US and China; supply chains are so dependent on China.
Trade between the two countries alone last year reached £429 billion, with the US running a trade deficit with China. Nevertheless, the tariffs imposed by Trump’s first administration, and maintained by Joe Biden, have diminished US dependency on China over the last decade.
And thank God for that. Whatever one thinks of Trump’s tariffs, the world has to confront the reality that China – a totalitarian state that severely limits the rights of its own citizens, uses slave labour, and has tried to erase the identity of Tibetans and Uyghurs – has become a dominant producer of consumer goods on which we have created an unhealthy dependency.
Europe has already faced an energy crisis when it had to wean itself off its dependency on cheap Russian gas in the aftermath of the unprovoked invasion of Ukraine 3 years ago.
It is similarly important to avoid a future crisis of dependency on Chinese supplies, in particular its massive control over rare earth minerals, without which our electronics, solar energy, and electrical car manufacturing sectors cannot function.
So could there be method to Trump’s madness? Is it possible that China could come off worse in this battle? Satirical posts on X showing Trump reading Sun Tzu’s The Art of War and Xi Jinping studying Trump’s The Art of the Deal may not be far-fetched.
Xi and the Chinese Communist Party (CCP) are stubborn. Xi has refused to back away from the 84 per cent retaliatory tariffs China has imposed on the US. And although he can be calculating, he ultimately cares more about ideology and what the Chinese call “face” or prestige.
As former Australian prime minister Kevin Rudd argues in his new book, On Xi Jinping, Xi’s “Marxist Nationalism” mindset involves “taking Chinese politics to the Leninist Left, Chinese economics to the Marxist Left, and Chinese foreign policy to the nationalist Right.”
Xi will almost certainly weaponise Trump’s tariffs to stir up nationalist sentiment among Chinese people, framing the trade war as an attack not on the CCP but on China.
But there are also dangers that Xi could overreact in his efforts to retaliate. In a worst-case scenario, if the economic pain for Chinese people reaches intolerable levels, he may lash out by invading or blockading Taiwan.
This would unleash a global crisis far exceeding the current trade war, but it would also carry risks for Xi and the CCP. If the US remains robust and Xi’s aggression fails, it could be very costly to the Chinese leader.
The pause on broad-based tariffs on trading partners around the world is welcome, and the focus on China is right. As former vice-president Mike Pence tweeted yesterday: “When America trades with allies, it’s a win for the American people. Our goal should be free trade with free nations.” He added: “It’s time we recognise China is the greatest national and economic threat of our time.”
An even more thoughtful strategy would have been to impose targeted sanctions rather than broad tariffs. Sanctions that focused on Chinese companies that facilitate the genocide of the Uyghurs, slave labour in supply chains, and the surveillance state.
The discovery of Chinese soldiers fighting with Russia in Ukraine, revealed yesterday, as well as its support for dictatorships such as Myanmar’s and North Korea’s, illustrate that it is no friend to the free world. Its campaign of transnational repression – playing out on university campuses and neighbourhoods in Britain and elsewhere – is a further reminder of this.
If the US is successful in ring-fencing China, and especially if it can bring other major regional powers and export competitors such as Japan and South Korea on-side, it could spell trouble for China’s economy, which is already battling extraordinary debt, slow growth, deflationary pressures and a failing real estate market.
A scenario where China invades Taiwan and threatens to cut off Western access to its rare earth minerals, if anyone dares to oppose it, is not a far-fetched one, and demonstrates the unhealthy reliance we have created on critical Chinese supply chains.
But if the US is able to leverage the rest of the world to close off their markets to China in any meaningful way, this could cause mass unemployment and recession in China – and could be the spark for a domestic revolt on a scale that could threaten Xi’s grip on power.
This article was originally published in The Telegraph.