If you have a brain attuned to geo-politics little things don’t go unnoticed. One thing is Trump’s change in stance on China.
Geopolitical events have far-reaching implications on global trade policies and economic dynamics. One such event is the strategic maneuvering between the United States and China during President Trump’s administration was the threat of 60% and 100% tariffs on China. The influence of powerful donors and the interplay of threats and rewards have significantly shaped these policies, leading to complex outcomes. I would be surprised to see tariffs over 20%.
The Influence of Large Donors
A notable instance of geopolitical influence is the involvement of a significant donor to President Trump, who has factories in China. This donor’s interests likely played a role in tempering the President’s aggressive stance on Chinese tariffs. The Chinese government, understanding the leverage they held, may have bluntly communicated with the factory owner, threatening to shut down operations if harsh tariffs were imposed. This illustrates how major US policy decisions can be altered to protect the interests of billionaires.
Threats and Rewards
The hypothesized threat from China to the donor likely came in July of 2024, along with a reward. Based on our assessment it was around China could have promised to ensure that the donor’s products would dominate the Chinese market, creating a mutually beneficial arrangement. However, this arrangement presents a challenge: President Trump, known for his love of tariffs, faced a dilemma. While he desired to impose tariffs, the need to protect influential interests led to a nuanced approach.
Trump’s Tariff Strategy
Despite the pressures, President Trump has continued to pursue tariffs, albeit with modifications such as against Mexico and Canada, which by the way have very low trade surpluses as a ratio compared to other countries. The deal with China, signed in 2019, aimed to bring an additional $100 billion annually to the United States. At the time, the China imported $123 billion worth of goods from China, increasing to $223 billion under the new terms. This deal allowed Trump to impose minimal tariffs on China, around 10%, significantly lower than the initial 19.3% average.
Economic Implications
While a 10% tariff may seem insufficient, it is important to consider the broader economic context. The devaluation of the Chinese currency by about 21% over the past decade and a recent 10% deflation in goods over the last two years, means that Chinese products remain competitively priced, actually less expensive than in 2014. Consequently, even with the new tariffs, Chinese goods are cheaper than they were ten years ago. China also can devalue its currency by another 36% in essense China neutralizing a 36% tariffs so US importers don’t even know it existed in the first place.
Global Trade Shifts
The deal between China and Trump is poised to have profound effects on global trade. The US will gain $223 billion in sales, while Trump imposes reciprocal tariffs on several other countries. As China faces minimal tariffs, factories previously located in Europe may relocate back to China. This shift will bolster China’s export capacity to the US, strengthening its economic base and insuring that China will have world domination by 2035.
As China becomes richer it will solidify more Strategic Partnerships with countries, and the USA will more likely be isolated from the world.
The Policy
If President Trump does not come up with balanced trade between China, then the USA will lose superpower status by 2050 or sooner. If Trump does create a balanced trade relationship, then China will not ever make enough wealth via trade to challenge the USA.
