Wessie du Toit
“If you want to strike China on the cheek, China will strike you back.” So declared Victor Gao, a lawyer and vocal supporter of China’s ruling Communist Party, in a recent debate with former U.S. State Department official Elliott Abrams. The two were sparring on a Saudi news network, but Gao’s remarks were quoted approvingly in the China Daily, a paper owned by the CCP’s propaganda department. His toe-to-toe, blow-for-blow defiance was typical of the tone that China’s leadership adopted at the outset of their latest trade war with America. As Donald Trump ramped up tariffs on Chinese goods, ultimately reaching 145%, China implemented its own 125% tariffs and insisted that it was not interested in negotiation unless Trump retreated from his policy first.
That pride and bellicosity are consistent with how the world views China at the moment—a tightly-run ship moving into a Chinese Century and in position to be the prime beneficiary as the United States self-destructs. But a closer look shows that the picture is much more complicated. China has gotten very good at hiding high debt rates and low income levels in the economic face it presents to the world. Government interference in the economy has resulted in prodigious waste and overinvestment in unproductive sectors. China’s dizzying growth is real, but the underlying strength of the economy will be seriously tested in the trade war.
The Trade War
Going into this uncertain period, China does seem to have a few trump cards in its hand. Put simply, Chinese imports are more difficult for the United States to replace than vice-versa. Among the goods supplied by China—which has a $300 billion trade surplus with the United States—are valuable shipments of smartphones and computers, industrial machinery, and rare-earth minerals (used in various high-tech products such as EV batteries and advanced weaponry). American exports to China also comprise some sophisticated goods like aircraft parts and chemicals, but are weighted towards fossil fuels and agricultural products (soybeans were the biggest single export in 2024). What is more, around 40% of U.S. imports from China are components used by America’s own manufacturing sector. So Trump’s tariffs will hurt not just American consumers, but American factories and farms, the same parts of the economy that he is supposedly trying to support.
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