Trump’s Tariff War Exposes China’s Hidden Fragilities

Trump’s Tariff War Exposes China’s Hidden Fragilities

Trade wars are tough. They disrupt the status quo, drive up prices in the short term, strain supply chains, and inject uncertainty into the economy.

But they can also serve a larger strategic purpose.

By recalibrating trade relationships and reducing our overreliance on China, this conflict could lay the foundation for a more balanced and resilient global economy. It won’t be painless—but if managed wisely, the long-term gains may well outweigh the short-term costs.

China has several tools at its disposal to retaliate against the U.S. It has already taken steps to restrict the export of critical rare earth minerals and has attempted to rally support among allies and neighboring nations.

But as the junior power in the U.S.–China relationship, and as the surplus nation whose economic rise has been fueled in part by intellectual property theft and other coercive practices, China also faces significant vulnerabilities.

And, as I wrote last week, they’re already contending with serious internal problems.

White House National Economic Council Director Kevin Hassett reported on Monday that the Trump administration is currently engaged in trade negotiations with representatives from 130 nations. “We’ve got everybody in the trade team and even deputies of people in the trade team talking to just about everybody on Earth, and I think that we’ve got more than 10 deals where there’s very good, amazing offers made to the U.S.,” he said. That is good news, indeed.

In a Monday op-ed, historian and conservative commentator Victor Davis Hanson made the case that China will lose the trade war with the U.S. and that it would happen “gradually, then suddenly.” When nations are forced “to choose between a rogue economic actor and a flawed but fairer partner with unmatched global power,” they are far more likely to choose the U.S.

Hanson concedes that China can inflict short-term damage on the U.S., particularly through a halt in exports of pharmaceuticals or rare earth minerals.

If China really does reduce most of its exports to the U.S., America will have to scramble for a year or so to establish new supply chains and some alternate importers of U.S. products. But after a year of gradual dislocation, China will begin to hemorrhage, and then quite suddenly, given the U.S. has almost all the advantages—if it chooses to use them.

…

Consensual societies are far more flexible in dealing with external pressures and volatile public opinion. True, Trump must face a midterm election in 18 months. However, Xi Jinping may soon face a third of his export factory workforce unemployed—in a society that has no mechanism for them to vent tensions and objections peacefully.

He notes that “China is running a nearly $1-trillion trade surplus with the world” which is the result of its “market manipulations, product dumping, asymmetrical tariffs, patent, copyright and technology theft, a corrupt Chinese judicial system, and Western laxity—or what might be mildly called ‘bullying.'” This will make it difficult for China to claim “victimhood when tariffs and surpluses illustrate contrived trade aggression.”

Hanson essentially concludes that most countries have caught on to China, which, in his words, “has done everything possible to incur global distrust and fear.” The Chinese Communist Party’s refusal to take responsibility for unleashing COVID-19 on the world spoke volumes.

In sum, if the Trump administration can conclude first-round—good enough but not yet perfect— trade deals in the next few weeks with major EU countries, Japan, and other Asian and Pacific powerhouses, and then redirect to China, it will gain both political support and economic advantage. It also must message strategically, given that China, for a half-century, has waged a quiet trade war that has now birthed a loud reaction. So, the administration must remember that the current status quo is the aberration, and its correction is a return to normalcy.

In the end, the EU and Asian nations should know the difference between their protective and rules-based ally, with whom they have run up huge and unfair surpluses, and a rogue bully, whose flagrant violations of trade norms and unfair tariffs have ensured them large trade deficits. And if they don’t calibrate their economic self-interest, but act emotionally, then they should at least consider realpolitik facts, such as which nation has the larger economy, the more open political system, and the largest and most lethal military that, in extremis, would come to their aid—against a bullying China.

I highly recommend reading the entire article.

Beyond China’s current economic troubles and Trump’s newly declared tariff war, the authoritarian state faces a deeper, more intractable challenge—one that no amount of control can resolve. A similar obstacle, in fact, was what toppled Japan from its economic heights in the 1990s.

Those of us of a certain age recall that during the 1980s and early 1990s, Japan’s economy was on fire. Japanese cars and electronics flooded the U.S. market—I myself drove a Datsun at the time, a Nissan brand that was phased out in 1986. Around the world, companies scrambled to emulate Japan’s “just-in-time” or “lean” manufacturing practices, where production matched demand with remarkable precision. Japan was riding high, and many Americans believed it was only a matter of time before it surpassed us.

In a Monday op-ed titled The End of the Chinese Dream, Chinese demographer, author, and activist Yi Fuxian noted that due to a young population and a rapidly growing workforce, “Japan’s GDP grew from a mere 9% of US GDP in 1960 to 73% in 1995, and its per capita GDP grew from 17% of America’s to 154% in the same period.” Additionally, just as we consider China to be our “chief rival” today, a 1989 poll found that, by a 3-to-1 margin, Americans worried more about the economic threat posed by Japan than the military threat posed by the Soviet Union.

But as we all know, it didn’t work out that way. As the Samurai Nation learned the hard way, demographics matter. Yi pointed out that when Japan’s ratio of working age people to those over 65 years old fell below that of the U.S. in the early 1990s, Japan’s GDP growth rate began to slow. Yi explained, “Its prime-age labor force … has been declining since 1995, whereas America’s will continue to grow throughout this century. As of 2024, Japan’s GDP had fallen to just 14.5% that of the US, and its per capita GDP had fallen to 38% of the US level.”

Yi emphasized that while comparisons to 1990s Japan are frequent, China faces an even bleaker future because its fertility rate (children per woman) is even lower than Japan’s. “In 2000, 2010, and 2022, Japan’s fertility rate … was 1.36, 1.39, and 1.26, respectively, whereas China’s was only 1.22, 1.18, and 1.05.. China is now struggling to stabilize its fertility rate at a meager 0.8 — less than half the “replacement rate” (2.1). Its prime-age labor force has been shrinking since 2012, not coincidentally when its three-decade run of double-digit GDP growth ended.”

China’s one-child policy, in effect from 1979 to 2015, is directly to blame.

Despite the hype from the legacy media—including, more often than not, the Wall Street Journal’s editorial board—the Trump administration has made meaningful progress toward leveling the international playing field. Yes, there may be short-term pain, but it’s clear he’s playing the long game.

Elizabeth writes commentary for Legal Insurrection and The Washington Examiner. She is an academy fellow at The Heritage Foundation. Please follow Elizabeth on X or LinkedIn.

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