China responded to last week’s tariffs announcement by Donald Trump with a 34% tariff of its own. China’s tariff is expected to take effect on Thursday. Trump fired back on Monday, giving China 24 hours to withdraw its 34% increase or face 50% tariffs from the U.S. beginning Wednesday.
“Additionally, all talks with China concerning their requested meetings with us will be terminated! Negotiations with other countries, which have also requested meetings, will begin taking place immediately,” Trump wrote on Truth Social.
“It certainly looks like [a trade war], and it’s escalating,” Gordon Chang said on Washington Watch.
The U.S. appears to be in really good shape for a trade war against China, he told show host Tony Perkins. But the danger in a failing Chinese economy, Chang added – should that come to pass – is the impact that could have on military decisions by Xi Jinping, China’s communist leader.
If China does not rescind its threatened 34% tariff, the additional 50% applied by Trump would take U.S. tariff rates on China to more than 100%, Chang explained.
“This is important because China right now is really out of ammunition. They're the smaller economy. Their economy, even with their inflated reporting, is less than two-thirds the size of ours,” he pointed out.
China’s trade surplus with the U.S. reached an estimated $295 billion in 2024. While a trade surplus leads to more cash for reinvestment, growing demand for a country’s exports can push up the value of its currency and make goods more expensive for foreign buyers.
Moving ahead, China needs U.S. buyers. “Trade surplus countries can't really do much in a trade war. The only thing they can try and do is intimidate President Trump to back down – but President Trump is not backing down,” Chang stated.
So, the ball is back in the Chinese leader’s court. What will he do from here?
Xi has allowed his economy to become export-reliant without enough buyers on the home front to sustain the status quo. Will he willingly turn his back on American buyers?
“I think Xi Jinping is in a very difficult position right now,” Chang argued. “… Their economy needs America to buy their products, especially now, because Xi Jinping has turned his back on consumption as the fundamental basis of the Chinese economy, which means his only way out of an increasingly serious situation is to export more. He can't replace the U.S. market, the largest in the world.”
Americans dig the cheaper goods
The U.S.-China partnership has been beneficial for Americans too with cheaper products coming from a nation possessing abundant manpower and low-cost labor.
Americans have become quite fond of lower-priced goods, and that could lead to political pressure on Trump in a trade war. But that hardly gives Xi an edge, according to Chang.
“We can hold out for a long time,” he noted. “Now, politically, it would be difficult for President Trump, but he doesn't face something until, let's say, the midterms. So, he's got a lot of time in which to have his moves bear fruit.”
If it looks like Xi is over a barrel, Trump has his challenges too, Chang said.
“We’re in an unsustainable situation. America accounts for almost half the world’s trade deficits. I think President Trump gets high marks for trying to deal with this, something his predecessors let slide for decades.”
Even as Wall Street has reacted negatively to Trump’s tariffs – stocks were trading up earlier on Tuesday – ignoring trade realities is not a plan. At some point the piper gets paid, Chang said. It’s not realistic to think otherwise.
“I understand Wall Street's reaction,” he offered, “but as Americans, we've got to ask ourselves, do we really think that we could get out of decades of misguided, really horrible trade policy and not bear some cost? Of course, we’re going to have to do that.”
With a U.S. trade deficit so far out of balance, Trump’s tariff plan is the “best way” to prevent a Chinese takeover of the U.S. economy, Chang said – pointing out that that would be the biggest domino to fall as other economies succumb as well.
“This is the right move. It may look really ugly right now, but it’s absolutely necessary,” Chang added.
A number of vulnerable Asian nations are also watching the China-U.S. trade fireworks.
“Xi Jinping right now has an economy that's not growing at the 5.0% pace that they reported for last year. It's probably about zero. With the actions that we have seen over the last couple of weeks, it's probably heading to deep contraction territory,” Chang said.
The downside of winning a trade war
If the Chinese economy tanks, it could be war – not a trade war – that bails out Xi Jinping.
There have been “dangerous provocations” from China toward South Korea, Japan, Taiwan, the Philippines and Australia in recent weeks, Chang noted.
Xi, he said, “might decide a war is in his personal interest to prevent other Communist Party figures from challenging or maybe even deposing him. So, right now I think the situation is extremely tense across China's periphery.”
