Trump won’t admit it – but he blinked first in his China trade war

Having promised to wage a trade war on China with the most punishing tariffs yet, Trump’s White House quickly and quietly backtracked when it came to Apple iPhones and other computers, writes Chris Blackhurst – who warns that ultimately, the US will have to find common ground with president Xi

A fair prediction is that in between watching golf at the US Masters, playing the game himself, touring the tables and glad-handing the diners at Mar-a-Lago, Donald Trump has found little time to study Bertrand Russell.

This is a pity, since it might pay him and America to absorb the British philosopher’s The Problem of China, published in 1922, if only for this passage alone: “The Chinese nation is the most patient in the world; it thinks of centuries as other nations think of decades. It is essentially indestructible and can afford to wait.”

There is another short phrase in Mandarin that might grab even Donald Trump’s attention, “chi ku”, which literally translates into “eating bitterness” – meaning to suffer without complaint.

It is sayings like this that define China’s culture and approach, as Russell observed. Today, they lie behind Beijing’s strategy towards the dramatic escalation by Trump of the US’s economic rivalry with the world’s most populous nation.

Already, the US president has blinked – or rather, appeared to blink. On Friday, China hit back at Trump’s tariffs by raising the duty on US imports from 84 per cent to 125 per cent. At the weekend, it was revealed that the US was excluding smartphones, computers and other consumer electronics from its own increase. That looked like a climbdown.

No, said US commerce secretary, Howard Lutnick. Those products would soon be covered by levies separate from those imposed on specific countries. Then Trump doubled down, claiming in a social media post there was no exception for those goods. Out came the block capitals. “We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming national security tariff investigations.” Still, to exempt now, appeared like a reversal.

President Xi, as is his wont, said nothing. We can expect more of the same in the coming days and weeks – muscle-flexing and shouting from one side versus quiet fortitude on the other.

It does not mean that China will not be reeling. The calculation of Trump and his circle is that China needs the US. Without that huge trade imbalance, to which he constantly refers, the country has no equivalent market for its exports. Xi and his colleagues, they reckon, depend on the US for the nation’s booming prosperity, to feed its population and at the same time, fuel the rise in wealth of the bulging middle-class.

Where trade is concerned, US v China is not new. Indeed, Trump attempted to tackle the disparity between the two during his first term. China responded with its “dual circulation” or “new development pattern”, which meant increasing domestic consumption and self-reliance while continuing to promote foreign trade.

Trump is having a second crack. But he is going about it in a less focused fashion, wrapping three objectives into a single strike: to raise federal revenue; to punish countries like Canada and Mexico for non-financial reasons, such as the supply of drugs; and to restore a more level balance of trade. That has involved three sets of advisors and created a recipe for confusion.

It has also tried to blend economics with politics, and where tariffs are concerned, the two don’t mix. Economists are always taught that tariffs are a bad idea, that they should not be imposed and should not be responded to. But Trump believes he has America’s political approval, and that most Americans will support him.

Trump signalled repeatedly the move was coming. The Chinese have been able to prepare. Now he has fired the first salvo, they can watch as America tries to deploy one missile firing to hit three targets.

While Trump concentrates on the Chinese trade surplus, China can remain stoic, safe in the knowledge they hold a key card in possessing substantial US government debt – contrast that with the UK, which early on played possibly its only card in inviting Trump for a second state visit.

China may not directly offload American dollars, but express its obduracy in other ways: by slowing down on US investments, putting less in and redirecting capital elsewhere. Also in China’s hand is the security that its global dominance in manufacturing is a match for America’s hegemony in financial services and AI. It can exploit, too, the fragmentation heightened by the scattergun US approach. Already, Europe is showing signs of readying to become closer to Beijing.

Both superpowers will hurt – they are too dependent on each other not to. But it might prove to be a mistake to interpret US bombast as a likelihood of victory. They will have to find an accommodation. Critically, that must be achieved without loss of face to both leaders.

Whatever Trump says and Xi chooses not to, that is almost certainly where their competition is heading.