China may act tough, but the reality is: apart from Russia, hardly any country may stand with it in this trade war!
There are more questions than answers as the world grapples with the economic flux created by US President Donald Trump’s ‘America First’ policy. After imposing tariffs on 60 countries, why did he suspend implementation for 90 days? Has the pressure of the market upheaval and the protests in the US got to him? Or does he need the support of old allies like Europe in his trade war against China? Has China gotten itself entangled in the tariff war? There are many questions that come to mind but presently, remain unanswered. If this is indeed a well thought out strategy, then how effective can it really be?
Even as all 60 affected countries try to figure out their response to Trump’s tariffs, he has gone ahead and announced a 90-day reprieve for all except China. A 10 per cent tariff remains in place, but that can be absorbed by most. What is more concerning is the mystery of what lies in store? What will be President Trump’s next move? To understand this, it is important to note that no laxity has been afforded to China where tariffs have been raised from 20 per cent to 145 per cent. In response, China too has retaliated with a 125 per cent increase in tariffs on US goods. A trade war has now officially begun between the two nations. China has made it clear that it will fight to the very end and not bow down to threats from America.
China believes that countries upset with America might align with it. Even if they don’t support China directly, they might at least remain neutral. President Xi Jinping has even told the European Union that everyone should unite and oppose America’s unilateral bullying. However, before China could make its next move, Trump foiled China’s intentions by suspending tariffs on other countries for 90 days.
Interestingly, before imposing tariffs, Trump went so far as to emotionally call countries considered traditional US allies as ‘looters.’ But in trade, perhaps language is not as important as what seems to matter is profit and convenience. If the US offers convenience, these countries are likely to stick with it, because China, in any form, is not considered a trustworthy partner.
So, what will happen to China in this situation? Despite being the world’s second-largest superpower, China’s internal situation is far from stable. The real estate sector is going through a terrible phase, and unemployment is steadily rising. In such conditions, if exports decline, many factories will shut down. China exports approximately $440 billion worth of goods to the US alone. When that gets hit with a 145% tariff wall, the price advantage stands neutralised. Rerouting Chinese products through other nations is also not a solution as Trump has said he would be keeping a keen eye on such practices.
Undoubtedly, America will face problems too. Inflation in the US will rise. But remember, Trump has already declared that America is a rich country. This implies that the US is prepared for such losses. That said, to trouble America, China will explore other paths. Currently, China has mastery in refining key metals like copper and lithium. China may try to make it difficult for the US to access these resources. For example, the US military relies on metals like gallium and germanium for thermal imaging, and China has already started creating supply disruptions for these commodities. Similarly, the US will try to restrict China’s access to all critical items needed for its industrial sector — like advanced microchips, which are vital for artificial intelligence.
China’s biggest problem is that, apart from Russia, hardly any other major country will openly support it. If Trump fights this economic war with the backing of the rest of the world, China’s future could be filled with crises. But Trump is Trump — every move he makes is a ‘Trump card’ in his eyes. Who knows what card he’ll play next!
Salute to the courage of Arzoo Kazmi!
And finally, a word about Pakistan’s fearless journalist Arzoo Kazmi. She regrets that her ancestors left India during the Partition in 1947. Arzoo lives in Islamabad and boldly exposes the wrongdoings of Pakistani rulers, intelligence agencies, and the military. She openly praises India’s progress and calls out those responsible for ruining Pakistan. For years, she has waved the flag of fearless journalism, but now her life is in danger. Her bank accounts, cards, and passport have all been frozen. She is in crisis. In a video message, she informed the world and declared that she will not bow down. Salute to your courage, Arzoo! We are praying for your safety.
The author is the chairman, Editorial Board of Lokmat Media and former member of Rajya Sabha.