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The Financial Times on a new round of trade absurdity in the White House.
Washington is in the midst of a new round of economic turbulence. Donald Trump first announced record 145% tariffs on all goods from China. Then he suddenly made an exception for smartphones and electronics. And then he reiterated that “no one will get away with anything”.
It no longer looks like a well-thought-out trading strategy. It looks like chaos,” writes the Financial Times.
Why is Trump backing down?
It turned out that the tariff war was not so simple. Trump’s logic was as old as time: “We buy much more from China than they do from us, so they are at a disadvantage.”
But as analyst Adam Posen explains in Foreign Affairs, it is precisely this dependence on Chinese exports that gives Beijing an advantage. Because America wants to buy Chinese goods – not for China’s sake, but for its own.
80% of iPhone smartphones are made in China. Most household appliances are also made in China. Americans are definitely not happy about the prospect of buying phones or air conditioners at double the price.
China can wait. Or it can push.
So far, Trump has been forced to gradually add more and more categories of goods to the list of tariff exemptions. There is no alternative – it will take years to restore production of all these goods in the US and will be much more expensive.
And China can wait – it holds the levers of real influence:
- Almost 50% of the world’s antibiotic components are made in China;
- Important rare earth materials for F-35 fighters come from China;
- second in the world in terms of US government bonds held.
If Beijing wants to, it has enough leverage to make Washington very painful.
The US tariff war is looking more and more like a game of tariff poker, in which Donald Trump is already forced to play down to save his own rating and avoid shortages of goods and rising prices before the election.
