Trump’s Futile Trade Wars Against China
Why it will fail... again
“History is a mirror of the present, and a lesson for the present” – an old Iranian proverb that is lost on Washington elites, who are spreading chaos all over the world with their misguided policies. Unable to comprehend and adapt to the rapidly changing world, U.S. President Trump is engaging in imperialist and futile trade wars, especially with China, the world’s largest trading nation. Trump is blithely ignoring lessons from America’s past when tariffs and retaliatory tariffs after the infamous Smoot-Hawley Act exacerbated the Great Depression in the 1930s. For now, there is a plethora of reasons why Trump will fail and China will succeed in this economic war.
Let us start with the big picture: Trump’s obsession with trade deficit and his desire. To his credit, this is not a cynical populism that he adopted recently; he has been complaining about trade deficits for thirty-five years. To Trump, any country that has trade surplus with the US is “ripping off” America. This is mercantilism, which has been the core principle of prosperity for many countries and empires for centuries.
However, Trump is profoundly misguided when he also wants the dollar to be the global reserve currency. This is inherently contradictory to his objectives on trade. That is, the US must run trade deficits in order for the dollar to be widely available around the world for trade and FOREX. This is the well-known Triffin’s Dilemma that was enunciated in the 1960s.
Thus, Trump’s core trade and economic policies are deeply flawed.
Second, Trump wants to bring manufacturing back to the US, since he grew up in the 1950s and ‘60s when the US led the world as an industrial powerhouse. However, thanks to Wall Street, America has been undergoing de-industrialization for the last 40+ years. The financial overlords – who are the true rulers of America – want maximum returns for shareholders, which is only possible in the software and services sectors. Manufacturing is labor- and capital-intensive, and the profit margins are very low. This is why Western corporations started outsourcing manufacturing to Asia, China in particular.
Trump will fail to bring manufacturing back just as he could not in his first term. As mentioned before, the first hurdle is the American system. Second, after decades of offshoring, the US simply does not have the workforce that has the skill or the desire to work in manufacturing.
Look at the charts below. The one on the left shows the dramatic decline in the number of Americans employed in manufacturing -- down 35% since 1979. The second chart shows how China’s gross manufacturing is three times as large as that of the US.
Finally, the US does not have the infrastructure needed for manufacturing anymore. America’s bridges, highways and railways are old and crumbling. When it comes to sea ports, the 7 of the 10 busiest ports are in China. Shanghai handles staggering 5x as many containers as Los Angeles does. Chinese ports are also highly automated with autonomous vehicles and 5G, while the US is largely reliant on humans.
The biggest mistake that the West did was to discount the rise of China (and other countries like Russia and Iran in Eurasia). Thanks to imperialism and racism, the Washington consensus was that China would never be able to climb up the value chain in manufacturing. Everyone in the media, think tanks, and corporate America agreed that “communist” China could never compete with Western corporations, which were superior in technology and soft power.
Moreover, the imperialists were confident that capitalism would change China. After all, who could resist McDonald’s, Hollywood and the neoliberal teachings of Harvard University? However, what transpired over the last 40 years, stunned Americans: The emergence of Capitalism with Chinese characteristics.
In the US, the government is controlled by banks and corporations. In China, the reverse happened: The government sits above the capitalists to ensure that free market works for the people. The Chinese government spent enormous amount of money on infrastructure, education, technology, R&D, and a thriving ecosystem of not just manufacturing but technologies of all sorts – while America was busy bombing Iraq, Afghanistan, Libya, Syria etc.
Many Americans foolishly still think of China as a land of cheap labor, but more than half of all industrial robots in the world are being installed in Chinese factories every year. While Chinese companies were copy-cats in 2001 when China joined the WTO, they are now true innovators in smartphones, electric cars, e-commerce, robots, humanoids, drones, artificial intelligence etc.
Chinese company BYD is doing to EV what Henry Ford did to cars a century ago – provide excellent but affordable products through creative and efficient process management. China now makes EV ranging from $5000 to $120,000 – meeting the needs of everyone across the social classes. Last year, China produced more than 12 million electric cars – accounting for 2 in 3 EV worldwide – while exporting 6 million cars gasoline and electric cars globally. To the utter dismay of Americans, BYD is outselling Tesla in countries like Australia.
Unable to compete fairly, the US has essentially banned Chinese electric cars and has placed sanctions on 1000+ Chinese tech companies. Violating all the WTO rules and international norms, the US has also bullied European vassal countries into banning Huawei’s 5G products and not selling semiconductor chipmaking gear to China.
The delusional objective of Americans is to contain China by enforcing “small yard and high fence” – that is, restrict China from advancing in a few critical technological sectors. However, as the Chinese AI company DeepSeek proved, the Chinese are innovating rapidly under pressure. China is just one big innovation away from mastering semiconductor fabrication – i.e., in lithography. And that breakthrough is bound to happen soon.
As for US hoping to stop China through a hot war, China has built the world’s largest navy, hypersonic missiles, and even 6th generation fighter jets. Every war game (simulation) by the Pentagon shows the US losing to China. Also, after observing what happened to Ukraine, countries such as the Philippines would not dare to be geopolitical pawns for America.
Thus, in summary, Trump cannot cripple China with his tariffs and trade wars. And unless he plans to impose tariffs on every trading nation, American corporations and consumers will simply import Chinese goods rerouted through Mexico, Vietnam, India etc. Billionaire Trump’s tariffs will make the lives of average Americans miserable by increasing inflation and cost of living.
The US accounts for only 10% of China’s international trade. The Global South – especially those who are members of the Belt and Road Initiative – will continue to be the biggest buyers of Chinese goods. Europe, which might be getting decoupled from the USA, will be forced to look East for trade and technology partners, making the US even more irrelevant on the world stage.
How confident are the officials in Beijing about winning the trade war? Consider the rather stunning official statement: "If war is what the US wants, be it a tariff war, a trade war or any other type of war, we're ready to fight till the end.”
S.L. Kanthan
(This is my article originally published in Iran’s Press TV)