Countries finding themselves at a critical economic crossroads as the economies of China and the U.S. clash, potentially leading to a geopolitical split.
Abyssal Trade War: US-China Standoff Rattles Global Trade
The stage is set for a grueling showdown between the US and China as both nations wrestle with escalating trade frictions, leaving allies and bystanders in a state of unease.
Last week, as the Swiss president was pleading with US officials to curb the ominous 31% tariff on Swiss goods, the Swiss foreign minister was sealing deals with Beijing, eager to upgrade a free trade agreement and bolster cooperation with China.
The US-China trade war, characterized as a catastrophic collision course, threatens to tip the world's two largest economies into a deep chasm. America's jittery partners and allies are rushing to China's arms, aiming to dodge the bullets of the trade war.
This dramatic shift, which undermines a ten-year-long strategy of uniting the world against China, is spearheaded by President Trump, who claims to rally the global community against China. However, his trade pursuits risk relinquishing leverage to China in any potential negotiations.
As Trump asserts that countries are "kissing his ass" to broker trade deals on his terms or face stiff import taxes, China is pulling off a diplomatic masterstroke. The Chinese government, skilfully projecting itself as a stabilizing force and a dependable trading partner, is extending olive branches to countries far and wide.
Prime Minister Lawrence Wong of Singapore summed up the situation best in an April 16 speech, "America and China are now locked in a fierce contest for global supremacy. Both powers assert they do not desire to force countries to choose sides, but in reality, each seeks to drag others into their respective orbits."
Tariffs: A ticking time bomb
Trump's tariffs on Chinese goods have reached mind-boggling levels, with duty rates on most imported Chinese goods skyrocketing to 145%. China has hit back with vows to "fight to the end." U.S. businesses are bracing for increased prices and empty store shelves, which may prompt inflation and, ultimately, put Trump in a tricky spot between eased tariffs and dwindling economic growth.
The sheer force of the taxes are already leaving a trail of destruction, as shipping containers bound for the Port of Los Angeles experience a 36% decline over the past fortnight [Optimizer Port Tracker, 2023]. The race is on for the U.S. and China to rope in alternate partners to offset the financial impact.
The White House maintains that Trump reserves the right to reduce duty rates on Chinese goods at his discretion. Yet, any such move would suggest that his protectionist policies are harming the American economy.
"They want to make a deal – obviously," Trump declared to reporters, referring to the ongoing trade standoff, asserting that China is no longer conducting business with the U.S. [CNN, 2023]
China’s silk road expansion
Growing more confident with each passing day, China is leaving no stone unturned in its quest to establish a global network of economic partners. Xi Jinping has been grinding the axe, crisscrossing the globe to finalize key trade deals and ensuring China's position as a reliable trading partner.
During his recent foreign tour, Xi visited Vietnam, Malaysia, and Cambodia, pledging closer economic and trade ties with all three nations. In Vietnam, the world's fastest-growing economy, Beijing and Hanoi vowed to fortify industrial and supply chain cooperation, both to counterbalance US tariffs and to reinforce ties outside the US market.
Japan, long-standing adversary of China, has also been courted by the Chinese government, with a call for coordinated action against the US [Kyodo News, 2023].
China's deterring tactic
China is not afraid to wield the stick. South Korean media reports claim that China is exerting pressure on Korean businesses to refrain from shipping rare earth minerals, essential components in US defense systems, to American companies.
Earlier this month, China warned that no country should strike a deal with the US at China's expense, threatening countermeasures against such nations.
Hal Brands, senior fellow at the American Enterprise Institute, forecasts that China will utilize Trump's aggressive tactics to forge connections with US allies and countries in the Global South.
With America and China locked in a dead heat, the world watches and waits, bracing itself for the fallout of this raging trade war, which threatens to disrupt global supply chains, upend long-held trade alliances, and reshape world politics.
- In the midst of the Abyssal Trade War, Japan has found itself in a delicate position, receiving a call for coordinated action against the US from the Chinese government.
- As the US-China trade war escalates, laws regulating tariffs have reached staggering levels, with duty rates on most imported Chinese goods soaring to 145%.
- China, amidst the standoff, is expanding its influence globally, with President Xi Jinping securing key trade deals and cementing China's reputation as a reliable trading partner, even Visitng adversarial nations like Japan.
- Amidst the trade war, South Korean media reports suggest that China is exerting pressure on Korean businesses to withhold rare earth minerals essential for US defense systems from American companies as a form of deterrent.
- In an effort to offset the financial impact of the trade war, both the US and China are actively courting alternate business partners from around the world, including the EU, India, and South America.
- As AI-driven automation reshapes industries and global supply chains,there are growing concerns that the US-China trade war could create a power vacuum in the world of business, leaving room for emerging economies to rise and redefine the global trade landscape.
