If you are from the United States and follow trade matters, you have likely heard that China engages in abusive trade practices. Our policy ideas, which focus on strengthening US global relationships and countering China’s influence while rebuilding ties with Brazil, emphasize how China cultivates countries as essential economic partners or allies.
The reality is that China operates as a mercantilist nation, directing its actions toward either cultivating relationships or suppressing other countries. Therefore, if China actively seeks closer ties with certain nations, it logically follows that they are simultaneously working to repress others.
Although China has no formal trade policy favoring specific countries, it consistently imports more from certain nations, such as Brazil, Russia, Indonesia, Japan, South Korea, Australia, and Canada. These countries are crucial to China’s strategy for countering the United States, either by limiting US influence or by making trade so important to each of their economies, decoupling would be impossible.
China cultivates these relationships despite these countries not necessarily being future allies. Interestingly, China often maintains balanced trade or even runs trade deficits with these nations, highlighting the strategic importance it places on these relationships.
On the other side, China aims to suppress trade with certain countries for various reasons. We call these the MITU countries: Mexico, India, Turkey, and the United States. These reasons will be discussed below.
Turkey: The intersection of the Middle East, Asia, and Europe is a hotbed of rival powers. China has already chosen its champion in this struggle: Iran and Russia. Both Iran and Turkey aspire to be the dominant geopolitical force in the region. China, though seemingly on the sidelines of the Syrian Civil War, is allied with both Russia and Iran, who support Bashar al-Assad. Turkey, on the other hand, opposes Assad’s regime. This geopolitical alignment explains China’s efforts to not fully engage with Turkey.
China perceives Turkey as a potential threat to Iran. Should Turkey break free from the constraints imposed by other powers, it could emerge as the dominant superpower in the Middle East. This fear is rooted in historical anxieties and a deep-seated distrust of Turkey, known as Anti-Turkism, which stems from the Ottoman Empire’s historical dominance in the region.
Despite recent headlines from July 2024 suggesting a potential rapprochement between China and Turkey, this may not significantly impact their trade relationship. China, with its deeply ingrained mercantilist policies, will likely continue to suppress any potential manufacturing competition, including Turkey.
China views Turkey’s growing manufacturing sector as a threat. Turkey, under the leadership of Recep Tayyip Erdoğan, possesses a dynamic economy capable of rapidly establishing factories and generating new exports. To protect its own manufacturing dominance, China minimizes imports from Turkey.
China understands that increasing Turkish exports strengthens Turkey’s manufacturing sector, which in turn increases competition with Chinese exports. This competition ultimately threatens China’s export volume and market share.
The trade numbers speak for themselves. In 2023, China imported a mere $3.5 billion from Turkey, while Turkey imported $43 billion from China. This 12-to-1 ratio is far more imbalanced than even the trade relationship between the United States and China. For comparison, Turkey’s exports to Europe in 2023 totaled $105 billion It is one of the most imbalanced trade relationships in the entire word, and it is done on purpose.
Mexico presents another threat to China’s economic ambitions. As China’s primary competitor for the US market, Mexico’s economic strength directly challenges China’s export dominance.
Paradoxically, during his presidency, Andrés Manuel López Obrador (AMLO) allowed the peso to appreciate, a move that benefited China. A strong peso makes Mexican exports to the United States more expensive, while making Chinese products comparatively more attractive and competitive.
This raises the question of whether China played a role in the peso’s appreciation. Did China actively purchase pesos on the open market to drive up its value? Or did they perhaps influence AMLO’s leftist administration, convincing them that a strong peso signaled a successful government? While it’s difficult to provide definitive proof, the possibility of China’s influence in this scenario certainly warrants consideration.
In 2022 and 2023, Mexico should have been selling pesos to maintain a weaker currency and boost exports. It appears that leftist policymakers may have pursued policies that inadvertently harmed exports by keeping the peso artificially strong.
Despite China’s efforts to forge partnerships and ideological connections with left-leaning governments, it will not hesitate to suppress Mexico’s economic rise. China views Mexico as a direct competitor for the US market, much like it sees Turkey as a competitor for the European market.
China will employ various tactics, including encouraging Mexico to mismanage its currency by keeping it artificially strong when it should be weaker. However, China recognizes that due to Mexico’s strong trade relationship and proximity to the United States, it will never be able to bring Mexico fully into its sphere of influence.
Therefore, given the competitive threat of Mexican manufacturing, China actively minimizes imports from Mexico. Possibly tampers with Mexico’s currency This results in a heavily imbalanced trade relationship: in 2023, China imported only $18 billion from Mexico while Mexico imported $114 billion from China, a ratio of 6.3 to 1. Not as bad as Turkey, but clearly done on purpose.
India, despite being a member of BRICS, is a strategic competitor and rival of China. The BRICS acronym, coined by Goldman Sachs banker Jim O’Neill, perhaps should have come with a disclaimer acknowledging the geopolitical misalignment between India and China.
China perceives India’s rise, particularly its large population and manufacturing potential, as a direct threat to its own economic competitiveness. China recognizes that if India successfully establishes itself as a major global manufacturing hub, it will become a formidable competitor vying for the same clients.
Consequently, China actively seeks to hinder India’s economic growth and refuses to support its development in any way.
Given the significant geopolitical tensions and economic rivalry between India and China, it’s perhaps time for India to consider leaving the BRICS group. The group’s composition and objectives might be better aligned if it were restructured to include Iran instead of India, reflecting the closer relationship between China and Iran, and the geopolitical alignment. This would create a more cohesive bloc with shared strategic interests.
Finally, we come to the United States, the last country on the list identified as being suppressed by China. Over the past decade, the US has imported an average of $500 billion worth of goods from China annually, while China has only imported $150 billion from the US. A 3.33 to 1 trade relationship.
China has the capacity to import significantly more from the US, potentially reaching $300 billion per year. However, it chooses not to. Instead, China strategically directs its import spending towards countries it views as potential future allies.
This strategy is part of a long-term decoupling process. China aims to reduce its reliance on the US market and achieve economic self-sufficiency before China invades Taiwan. As long as China is unable to survive without US technology, it will not rush into Taiwan.
The Solution:
The MITU countries (Mexico, India, Turkey, and the United States) need to form a trade pact with a clear objective: to counter China’s dominance in manufacturing. This pact should focus on two key strategies:
- Competitive Production: If China manufactures a product, at least one MITU country should develop the capacity to produce the same product competitively. This will reduce reliance on Chinese goods and create alternative supply chains.
- Coordinated Tariffs: The MITU countries should implement a coordinated tariff policy against China. The leaders of these nations should clearly state their intention to raise tariffs incrementally each month until a balanced 1-to-1 trade relationship with China is achieved.
- The USMCA renegotiation in 2026 should include a provision where Canada, the USA, and Mexico implement a unified tariff regime on goods imported from China. This would prevent Chinese products and components from being trans-shipped through Mexico to avoid higher tariffs in the US and Canada.
Why is this necessary:
China is deliberately suppressing the economies of the MITU countries. These countries are being exploited by China’s mercantilist policies. They are purchasing excessive amounts of goods from China when they could be sourcing these products from each other, fostering mutually beneficial trade relationships and reducing their dependence on China.
Collectively, the MITU countries imported approximately $750 billion worth of goods from China in 2023, representing 22% of China’s total exports. China will not willingly negotiate a deal that strengthens these countries’ manufacturing sectors and diminishes its own economic power. Therefore, a proactive and unified approach is essential to rebalance trade and foster domestic industrial growth within the MITU nations.
