Tariffs are the hot topic.  President Trump is using tariffs in a strategy that encompasses the whole of government.  Is the world prepared?  More precisely, is China prepared to go toe-to-toe?

Although the president has scaled back on the tariffs — e.g., a 90-day pause, exemptions on smartphones — he has not relented on China.  His “Liberation Day” announcement launched the U.S. version of the whole-of-government approach — first and foremost to revitalize America’s standing in the world, but it was also to target and perhaps to isolate China economically.

There are ample reasons for President Trump to zero in first and squarely on China.  Since the rise of the Chinese Communist Party (CCP), China has aimed to topple America by means above and beyond the traditional military path.  In 2021, we discussed the whole-of-government approach China has taken against the U.S. for the past three decades.  Brigadier General (ret.) Robert Spalding’s Stealth War accurately documented China’s economic and diplomatic machinations that followed a book on Irregular Warfare, written by two Chinese People’s Liberation Army (PLA) colonels.

America has lacked the willpower to coordinate a broader, integrated plan.  The U.S. default, hearkening back to the Teddy Roosevelt days, was to build up our military and carry that big stick.

For the first time in the post–World War II era, the U.S. is in a full, concerted effort against China — more on the economic side than via the kinetic means (combat warfare).

Tip of the Spear Aimed at China

The tip of the spear of this economic warfare is the imposition of tariffs, which now is a tit-for-tat yo-yo between the U.S. and China.  But a tit-for-tat can go for only so long before there is a breaking point.  It will initiate a war of attrition.  The U.S., the largest and the most powerful economy in the world and backed by the most potent military and diplomatic arms, will most likely outlast China, though with aches and pains that will mostly be borne by the average taxpayer.

For China, the numbers do not and cannot lie.  The Chinese are at a disadvantage: In 2023, according to Trading Economics, the U.S. is the largest market for Made in China goods, valued at $501 billion, or 15% of the total Chinese export market.  Take away the $275 billion that China “exports” to Hong Kong (or 8% of China’s export market), and the next biggest markets that China exports to are Japan and Korea at $157 billion and $148 billon, respectively.

Therefore, how can China alleviate, relieve, mitigate or even end this economic warfare before its entire economy and manufacturing foundation go into convulsions, as fewer and fewer of its products are being exported and sold due to the higher tariffs imposed on them?

Like in shooting warfare, a diversion is one of China’s options.  In addition to its now “regular” air incursion of Taiwan’s Air Defense Identification Zone (ADIZ), will China escalate its naval exercises in the Taiwan Strait and northward and southward toward the Senkaku Islands and the Luzon Strait, respectively?  Will this antagonize Japan and the Philippines and lured them into military action?

Another option, short of a full-scale invasion of Taiwan, is the military occupation of Chinese coastal islands of Kinmen (AKA Quemoy) and Matsu, long occupied by Taiwan since the end of WWII.

If there is an invasion of Kinmen and Matsu, one advantage Xi Jinping will gain is time.  Time is bought by Xi to semi-appease the hard-line CCP faction that has long wanted to “reunite” Taiwan with the “motherland” at the earliest.  Xi will state that China has shown that it can act decisively and conduct successful combat operations for the first time since the country’s 1970s fiasco against Vietnam.  He will also proclaim that this is the preview of the eventual takeover of Taiwan after he conducts “after action” reviews of the conquest of Kinmen and Matsu.  It will also confirm China’s refusal to never renounce the use of force against Taiwan and the 23 million Taiwanese.  More importantly, this option may be seen in the West — especially in the United States — that China may be serious in its objective to take over Taiwan.

For Taiwan, Kinmen and Matsu (and their combined 150,000 residents), while ruled from Taipei, have long lost its strategic importance.  No longer are the days when Chiang Kai-shek wanted to use these islands as staging areas and stepping stones to “reconquer the mainland” after he and his 1+ million Kuomintang forces fled China and established the nationalist Republic of China government on a Taiwan that had previously been a colony of Japan since 1895.

The unknowns will be how the U.S. will react to the military takeover of Taiwan’s islands.  Will the U.S.

1) reduce tariffs against China?

2) negotiate for a downward revision of its tariffs against China?

3) execute plans to defend Taiwan (and the most strategically important chip manufacturing plants in northeast Taiwan)?

Implement Tariffs to Influence World Prices and Revitalize American Manufacturing

The United States is the world’s largest economy and buyer of products.  If and when we buy less in widgets, the makers of those widgets, and the world, will notice.  Our demand for steel, chips, solar panels, and gadgets and widgets are second to none.  And if that demand decreases due to tariffs, basic Econ 101 dictates that supply may very well exceed demand, leading to price decreases.  Economists have called this phenomenon “terms-of-trade gain.”

This shift in demand (using U.S. and China as examples) between countries will be dependent of the supply country (China)’s ability to offload the now excess goods due to the tariffs imposed by the U.S.  If no nations can make up for the loss of Made in China goods due to Trump’s tariffs, would not the supply exceed demand and, ergo, lead to a drop in prices, where now the U.S. may be able to snatch them up at a cheaper price?

Use Tariffs as a Proxy to an Economic War with China

Trump’s imposition of tariffs is a clear sign of the U.S. engaging in an economic war against China.  The whole of government approach, initiated by increased tariffs and backed by the world’s most formidable military and diplomatic force, will reinvigorate the American economy and its manufacturing base.  No longer are the days when American just “talk softly and carry a big stick.”

Will this isolate and put a stranglehold on China?  Possibly. 

How China reacts and reciprocates, militarily or economically, will tell the world if they have the resources to combat this threat to their economy.

Image: Gage Skidmore via Flickr (cropped).

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