After days of breakneck tariff escalations between the United States and the Chinese regime, the two countries have entered a new era of heightened confrontation and decoupling.
That’s according to experts, who see little chance of reversal.
President Donald Trump’s unveiling of 34 percent reciprocal tariffs on China, alongside higher levies on dozens of other countries, on April 2 kick-started a series of tit-for-tat moves. The reciprocal tariffs were imposed to counter the regime’s decades of unfair trade practices.
After Beijing retaliated with its own 34 percent duty, Trump raised U.S. tariffs by 50 percent, only to again be matched by the Chinese regime, which has repeatedly vowed to “fight to the end.”
The U.S.–China tariff standoff is at its core a battle over the world economic order, experts say.
According to these analysts, there’s little room for meaningful negotiations between the United States and China anymore, and now it’s time to see which of the two countries other economic powers side with.
The two countries are heading toward a “collision,” according to James Lewis, senior vice president at the Center for Strategic and International Studies think tank.
“China is not going to give up, and they’ve been planning on how to deal with this since at least November,” Lewis told The Epoch Times.
“They expected decoupling. They have been planning,” he said, referring to what he learned from talking to Chinese Communist Party (CCP) officials.
“Trump has accelerated that, but they’ve been planning on how to manage decoupling since last year, at least.”
Mike Sun, a U.S.-based businessman with decades of experience advising foreign investors and traders doing business in China, said a showdown between the world’s largest and second-largest economies had been in Beijing’s outlook since Trump’s first term—and now, it’s finally happening. Sun uses an alias to protect himself from reprisals from the regime.
During the previous Trump administration, China proposed to buy U.S. products. Sun said this addressed Trump’s need to reduce the trade deficit between the two countries. The negotiations led to the “phase one” trade agreement signed in January 2020, which Beijing didn’t fulfill.
This time, however, the game is different.
Citing the goal of achieving reciprocity with all countries, Trump is seeking to rebuild the global economic order, Sun told The Epoch Times.
“The Chinese Communist Party has seen the difference between Trump’s current and previous approaches, too,” he said.
“The regime has seen that making concessions to the United States would lead to a future it cannot stomach, so it has chosen to fight.”
April 9 marked a watershed moment in U.S.–China relations, he said; the Chinese regime crossed the threshold from being a mere strategic competitor of the United States and started moving toward enemy status, like the Soviet Union during the Cold War.
China expert Alexander Liao said the CCP has little policy room to maneuver. Therefore, he said, there is a high probability that Beijing will resort to invading Taiwan to turn the tables. The insider information that he obtained recently from the Chinese military seems to corroborate his view.
How Will Allies Respond?
Since Trump announced reciprocal tariffs on April 2, the U.S. stock market has experienced a roller coaster ride, from a three-day decline unseen since the summer of 2020 to the biggest single-day rally since 2008.The U.S. president’s actions and the associated uncertainty have irked investors and some allies.
Based on Lewis’s conversations with officials in Brussels, he said politicians there are currently heavily inclined to decouple from the United States.
The Europeans are uncomfortable with the unpredictable nature of Trump’s decisions, he said.
Liao said he thinks Trump may push Europe somewhat in China’s direction, but not all the way there. After all, the ideological differences between the two are enormous.
“Siding with China comes with tremendous moral pressure,” he said, referring to the regime’s egregious human rights abuses.
Alexander Gray, CEO of American Global Strategies and a senior national security official under the first Trump administration, credited Trump for maneuvering the United States “into an excellent strategic position.”
Ten percent is four times the United States’ average tariff level before this year.
Lewis acknowledged Beijing’s intention to dominate the global market with its industrial policies.
Playing on China’s terms in the global markets, he said, means losses for the United States, Japan, South Korea, Europe, and other countries.
“So if you remain coupled to China under the current terms, you’ll lose,” Lewis said.
Nevertheless, Lewis said he is concerned that Trump’s actions will shift the global economy away from the United States and toward China, including from Europe.
Gray said China’s behavior will weigh more in allies’ considerations than the United States’ behavior.
“[Trump] has put China in an untenable position of revealing what many of us already knew: the PRC has built an economy designed to wage economic warfare for the perpetuation of the regime,” he said, using the abbreviation for China’s official name, the People’s Republic of China.
“Beijing’s unwillingness and inability to change behavior reveals the CCP for what it is and puts the U.S. and its allies and partners in a unified bloc opposing Xi’s malign activity.”
Can Xi Outwait Trump?
Analysts weighed in on the risks and factors supporting each camp in the ongoing trade standoff.It’s important to recognize the Chinese regime’s advantage in the holdout, Lewis said.
“They can take more pain than the U.S. can, because, if nothing else, they don’t have midterms, and all the Republicans have figured out they’re in trouble in the midterms,” Lewis said. “I think China has a higher pain tolerance.”
The Chinese regime operates on a timeline that is different from that of a U.S. administration.
Lewis said he learned from sources in the administration that Trump’s team expects to make all of the changes in three to six months—or the changes won’t happen at all.
“In this case, Xi Jinping can outwait Donald Trump,” he said.
Although the world won’t see protests on the streets in China like in the United States, CCP leader Xi Jinping is under a lot of pressure, according to Liao.
Liao said he doesn’t think Xi worries about the Chinese people, but the Party elites and officials could pose a real threat to Xi’s power.
When the elites disagree with the policy directions, they could band together and support another leader.
The flip side of Xi’s industrial policy is that it artificially boosts the manufacturing sector, which has generated a lot of overcapacity and increased the Chinese economy’s reliance on exports. Trump’s tariffs will deal a heavy blow to key provinces supporting China’s economic growth: Guangdong, Zhejiang, and Jiangsu. All of them are coastal and export-driven.
An economic slump hurts the wealth of communist elites, and the consequences could be dire. There’s precedent in the CCP’s history.
Hua Guofeng, the Party chairman who succeeded Mao Zedong, was outmaneuvered by Deng Xiaoping in power struggles in 1978. Deng’s stated reason was that the Chinese economy was on the brink of collapse.
This reason could be used to usurp Xi, Liao said. The opacity of the communist dictatorship means that people from the outside won’t see any signs of an upheaval until a new dictator has been established, he said, unlike in democratic societies, where the pressure on the political powers plays out in the open.
Liao said he believes that Trump needs to improve domestic employment and inflation to survive the standoff with Xi. The resilience of the U.S. economy will be a strong supporting factor for Trump.
The 10-year U.S. Treasury note auction of $39 billion on April 9 still showed solid investor demand. The yield was lower than anticipated but still posed the highest weekly gain since June 2013.
The robust bond sales and equity market rebound indicate that the fundamentals of the U.S. economy are still strong, Liao said.
Taiwan
Liao said he believes that Xi might invade Taiwan in a bid to turn the tide.“The Chinese Communist Party would want to change the fundamental driver in the market,“ he told The Epoch Times. ”It’s a buyer’s market globally due to overcapacity in peacetime, and America holds the most power by being the biggest buyer.
“However, entering a war means turning the economy into a seller’s market—whether it’s selling weapons or equipment, a war maximizes China’s manufacturing industry.”
By comparison, the United States’ manufacturing was $2.5 trillion in 2021. No data for 2022 and 2023 are available for the United States in the World Bank database.
According to Liao’s source in the Chinese military, the People’s Liberation Army (PLA) has issued an internal communiqué focused on three points.
First, a war on Taiwan is bound to happen. The situation may be similar to the Korean War, when peace talks, which lasted more than two years, were held amid the fighting.
Second, a war between China and the United States is bound to happen.
Third, the PLA distributed the insignia of the various branches of the U.S. military for Chinese soldiers to study so they could discern the enemy’s branch in battles.
“The atmosphere is quite tense in the PLA,” Liao said.
“A war can solve many problems for Xi: First, the economy wouldn’t matter so much anymore; second, he could calm down his opposing factions within the CCP and give the Chinese people an external reason to justify the rule of the Communist Party.”
