Donald Trump has applied a blizzard of trade tariffs across most industrial sectors and countries, rowing back, reducing, delaying and re-applying tariffs which are applied not so much as where other countries have prejudiced US goods but also where countries simply have a balance of payments surplus with the USA – or, in the case of the UK, even a deficit!

This has caused chaos in a world with massive integrated supply chains mainly organised by American companies to buy cheap in China and Southeast Asia and sell end products (like smartphones) expensively in the USA and Europe. It is the squeals of major American corporations (and rises in the cost of long term US debt) which have prompted the various Trump pauses and delays to some tariffs on most countries. China is the exception where 145% tariffs still apply – with more Trump exceptions for smartphones and computers, semiconductors, solar panels, flat panel television displays, flash drives, memory cards and solid state drives.

It might have been better to consult this table of US (and US allies’) industrial dependence on China before applying the tariffs: the graphs show US, German and Japanese dependence:

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From October 14, Chinese-built and -owned ships docking at US ports will be charged $50 a net ton, a rate that will increase by $30 a year over the next three years. 80% of world trade is transported by ship and the USA produces five such vessels a year while China produces 1,700 – a classic demonstration of how  turning around US production and trade weakness cannot respond to sudden changes in tariffs and boycotts – although the loss of critical imports on US domestic production is immediate.

Meanwhile Trump has threatened new tariffs on pharmaceuticals and medical supplies – a critical area of UK exports to the USA. Positive words from US Vice President Vance and the advanced stage of US-UK trade talks MIGHT mitigate that threat to the UK but the international threat remains critical for world trade.

Because Donald Trump has taken a sudden sledgehammer to crack a long term nut and waged not so much a tariff war against unfair trade practices as an economic one against any country which has a trade surplus with the USA, the fallout has hit the US stock market (down some $11 trillion since late January), US long term debt and the level of the Dollar against major currencies like the Euro and the Pound – although ironically the biggest fall this year has been against the Russian Ruble! The most significant signal of Dollar weakness is the all time high of $3,500 for gold. 

Last week saw the biggest weekly fall in the ten-year US Treasury since 2001 and the biggest weekly fall in the 30-year Treasury since 1982. These are dangerous times for a high stakes move with serious consequences for US consumers’ finances and Trump’s electoral support, not to mention complex international industrial and commercial supply chains – from parts for US iPhones and computers to rare earths (for which the USA relies 70% on China which in turn has 90% of rare earth processing).

Last week the US government informed Nvidia it would prohibit all future exports of its H20 chips to China, unless the company secures a special license. The company’s stock fell 6%. Apple sells more than 220 million iPhones a year and nine in ten are made in China. 

Trump raised the anti-China stakes even high when he said the USA was negotiating with some 70 countries and

“We may want countries to choose between us or China.”

China subsequently threatened third countries not to disadvantage China in any trade deals with the USA. 

Trump wants direct negotiations with the Chinese leader but Being has suggested each side nominates an expert trade negotiator. 

China Hits Back

China in response has suspended exports of key rare earth metals (samarium, gadolinium, yttrium, etc.) and magnets, which are critical for the auto industry (the very sector Trump wanted US workers to take market share from foreign manufacturers) semiconductors, and the US defence industry. China has retaliated with 125 percent tariffs on U.S. goods and stopped importing U.S. beef and LNG.

The USA Has a Trade Case

But the USA does have a genuine trade case against other countries. The EU’s fortress Europe tariffs are notorious with overt protectionism against food, agricultural products, cars and financial services and I note when the USA applied a 34% tariff on Chinese goods it roughly equated to the 35% tariff which the EU applies to Chinese electric cars – now with the possibility of further restrictions to stop the diverting of Chinese cars no longer sold in the USA!

A study published by the National Bureau of Economic Research found that approximately 90 percent of the drop in U.S. exports to China during the first Trump term was due not to market forces but unofficial non-tariff barriers.

Such barriers include targeted subsidies to boost exports, excess production exported, state control of cheaper labour, (even today Chinese manufacturing labour at $15,000 pa is far lower than US average manufacturing wages of $50,000) currency manipulation, technology theft, import administration, state targeted import substitution, excessive technical standards and import quotas. To that must be added the (recently boosted) China “grey trade” – whereby Chinese goods are channelled through other SE Asian countries where they are re-packaged as local production to avoid US tariffs. According to official data, China’s exports surged by 12.4 percent in March, with exports to ASEAN increasing by 11.6 percent and exports to Vietnam increasing nearly 19 percent. 

China’s leader Xi Jinping’s recent visits to Vietnam, Malaysia, and Cambodia could have secured their gray trade hubs but the USA has just imposed record high tariffs on Thailand, Malaysia, Cambodia and Vietnam ranging from 41% to 3,500%.

However the USA is not completely innocent as regards non-tariff barriers (NTBs), with the USA the 15th biggest user of NTBs. In particular “tariff rate quotas” apply low tariffs but then apply an import quota at that tariff to protect the domestic market. This is common in the agricultural sector behind which US agriculture shelters, maximising production to boost exports. In 2024 the USA exported $176bn in agricultural products with nearly 50% going to Mexico, Canada and China! 

But in one critical area of trade manipulation China has been pre-eminent – intellectual property theft, the long term consequences of which can be world changing as whole areas of industrial innovation shift wealth creation and trade surpluses. Typically either through imports of foreign technologies or joint ventures with western high tech firms China has stolen the technologies and saved years of development risks and costs.

For instance the US firm Westinghouse one of the world’s leading nuclear power developers undoubtedly had its technology stolen and Japanese and European rail businesses have said that Chinese rail companies used technology from shared ventures to develop their high-speed rail business.

The Spanish wind power producer Gamesa was required to manufacture parts using Chinese domestic producers; within years, the same manufacturers produced parts for domestic producers who undercut Gamesa through favourable loans and State support.

There have been many examples of industrial espionage by Chinese students and workers in western economies, helped by political and industrial naivety in e.g. the UK (and see this) and the USA. Other areas of industrial theft have been in the steel, aluminium and solar power industries. No wonder Trump has targeted tariffs at these sectors – albeit with a sledgehammer now hitting innocent allies as well as guilty foes.

Fair Trade, Respect and Trust 

The whole complex area of trade, tariffs, surpluses, deficits, geopolitical power struggles, free trade economics, comparative advantage, sovereign independence, defence industry production and waging military and economic war have come together as President Trump disrupts the world “order” in the hope that as the dust settles and new trade deals are struck it is the USA which will have benefited most from the removal of unfair trade. But even if all trade disputes were settled tomorrow it would take years to invest in domestic production and change international supply chains. China’s dominance in rare earths for instance has taken 30 years to build. 

Trump’s trade war is a partly justified gamble but the issues are not black and white. Fair trade depends on mutual respect and trust. How much will remain after the deluge?

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Rodney Atkinson has been a successful linguist and linguistic theorist, was formerly a lecturer at the University of Mainz, Germany and a merchant banker in the City of London. He is the Founder of the Freenations website (visited by individuals and government institutions from over 100 countries) an occasional adviser to MPs and the proprietor of his own commercial property company.

He is the author of over 100 articles and policy papers three internationally praised books on political economy: Government against the People (1986), The Emancipated Society (1988), The Failure of the State (1989) and three on the European Union, Treason at Maastricht (with Norris McWhirter CBE, fourth edition 1998) Europe’s Full Circle (third edition 1998 also published in Yugoslavia and Poland) and Fascist Europe Rising (2001 also published in Yugoslavia).

He is a regular contributor to Global Research.

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