TRUMP VERSUS CHINA: THE WAR OF TARIFF AND POWER
By Efraín Gonzales de Olarte
The decisions governments make are inspired by interests and/or principles. Under Donald Trump, interests not only predominate, but principles have been thrown overboard, starting with truth and justice. The world is increasingly threatened with being organized solely on the basis of particular economic interests, while the common good is becoming an delusion, thanks to the decisions of the American President.
On Saturday, April 5th, and in Easter Sunday, there were demonstrations against Donald Trump’s tariff policy in more than a thousand American cities. And, in several cities around the world the same thing has been happening. All the protesters are frightened by the measures taken by a President who, in fact, has become a bossy and erratic boss. The measures he has taken are not only unpopular and lacking in technical support, but several of them have also violated the norms of the American rule of law. Above all, he has scuttled all the free trade agreements the US had signed with several countries, implying that no treaty with the US can be trusted anymore. Thus, we have entered a period of uncertainty, triggered by those who believe they can rule the world according to their whims, with their simplistic economic ideas and by overriding their country’s institutions (the Constitution, the judges). We have a new dictator in front of us.
What could explain such behavior? In my opinion, there is an underlying issue to consider. China is close to becoming the world’s leading economic and technological power; consequently, it poses a threat to the United States, which has been the world’s leading power for several decades but is now in decline. It is a challenge to “American security,” an idea that promotes hegemony, the fight against communism, and the territorial or economic expansionism of the United States.
The problem is that China, governed by the Communist Party and with an autocratic regime, has achieved impressive economic and technological development and, in just 50 years, has almost caught up with the United States and even surpassed Europe. It has proposed the modern “Silk Road” as a development strategy based on global expansion through investments in infrastructure, trade, and financial support for countries with which it has economic and diplomatic relations. This is very different from the American strategy. For someone like Donald Trump – a wealthy, arrogant, Republican businessman (WASP) – China is not only a threat, but above all an economic enemy that must be neutralized – given the speed of its economic and technological development. This is why the slogan of his electoral campaign has been: “make America great again” (MAGA), to convince Americans of his crusade and entice them with this populist promise, without having a known plan in this regard.
On the other hand, Trump, to win the election, had the significant support of the largest American billionaires: Bezos, Musk, Zuckerberg, and Kushner, whose fortunes easily exceed $12.5 trillion, in addition to a few dozen Republican billionaires. In other words, today the United States government is in the hands of the richest, and economic policies will obviously favor their interests, and China is a threat to their businesses and profits, and ultimately to America’s declining supremacy.
This is where we begin to understand the pretexts Trump has sought for MAGA. He began by accusing Mexico and Canada of being suppliers of Fentanyl and promoting migration to the United States, and, the most misleading and implausible argument: all the countries of the world have been enriched thanks to the United States’ trade deficits, especially China and the European countries, which are the countries with which it has the most trade relations. Consequently, tariffs must be imposed, so that American imports will generate taxes (tariffs), thereby reducing the American trade deficit, swelling American fiscal coffers, and making America great again. The problem is that Trump assumes that a trade deficit equals a loss and a surplus equals a profit; in other words, he needs an introductory course in Economics. He confuses tariffs with Trade Balance.
Noticeably, Trump and his advisors appear ignorant of the basic principles of modern Economics, because if the United States buys more from abroad than it sells, it’s because they aren’t competitive, or because foreign goods are cheaper, or they simply don’t produce them. The absurdity is that, by imposing high tariffs on Chinese products, he is harming American companies that produce in China and sell in the American market (Apple, Nike, Ford, GM). Companies that left the US in search of cheap, skilled labor.
On the other hand, Trump hasn’t said anything about the balance of services that American companies export worldwide (Netflix, Amazon, Microsoft, Google, Oracle, etc.). For example, the balance of services with Europe is favorable to the United States by €109 billion in 2023. Suddenly, the Europeans could impose tariffs on these services, in return.
However, the tariff issue is merely a pretext for several objectives: 1. To recapture the global economic initiative, which the US has been losing. 2. To break with all existing free trade agreements and replace multilateralism with bilateralism, which strengthens the Trump administration’s negotiating power. 3. To attempt to weaken the Chinese economy. 4. To attempt to reindustrialize the US with the Import Substitution model, for which they should seek assistance from ECLAC. Moving Apple to the US doesn’t seem like a good idea—as long as such a move is feasible—since it is estimated that producing an iPhone in the US would cost more than double the current price, due to labor costs and supply chains.
It must be acknowledged that Trump has sought to use his business negotiation strategies, which made him rich: intimidating your competitor and then negotiating from a position favorable to him. It’s possible that this might work in the business world, but trying to govern a country with the same strategy is not only a conceptual error, but its results will not only be uncertain, but above all, it will destroy American Democracy and, possibly, its economy as well. He is not the owner of USA.
However, Trump has had to back down from his attempt to rule the world through tariffs, as the real world has shown him how it works: the stock markets have become a roller coaster; with each of his statements, investors are being confronted with their worst enemy: uncertainty. China seems to have enough resources and strategies to be less affected by a trade war. The Europeans, and their characteristic slowness, have allowed them to hold back from making decisions and wait for what might happen during these 90 days of tariff pause.
All this international turmoil created by Donald Trump’s decisions has had internal repercussions, and Americans who voted for him are starting to get nervous about whether MAGA will be possible, while those who didn’t vote for him and those who are being disadvantaged by Musk’s DOGE are taking to the streets to show their discontent.
Will Trump be able to listen to international and domestic voices to change his dictatorial tendencies? I have my doubts.
Miraflores, April 2025