China blinked — and Trump won the first round of his tariff war
Category: Op/Ed
Via: vic-eldred • last year • 13 commentsBy: Steven W. Mosher Published (New York Post)
S E E D E D C O N T E N T
The opening round of the tariff war with China is over. And earlier this week, President Trump achieved a very clear win.
The president had Chinese leader Xi Jinping on the ropes. Trump's 145% tariffs on Chinese goods landed a crushing blow to Beijing's economy, already staggering under the weight of rising unemployment, unsustainable debt, and rising bankruptcies.
But instead of giving China a knockout punch, Trump decided to hit the pause button. And it's worth asking why.
5Donald Trump has put a 90-day pause on his massive tariffs against China. AFP via Getty Images
With foreign investment pouring into the US, job growth strong and inflation low and falling, Trump was under little domestic pressure to back off of Beijing, skittish global markets notwithstanding.
Xi Jinping, however, was desperate to make a deal.
The past few weeks have seen tens of thousands of Chinese businesses closed and millions of workers laid off.
Had the high tariffs continued, over 50% of export companies would have gone under, and 30 million workers would have been on the streets.
Xi knew that, with falling property values and shrinking domestic consumption, keeping exports flowing to the US was vital to China's survival.
Americans only buy about 16% of the total exports, but because we buy in bulk and pay on time, we provide 50% of that sector's profits.
5Chinese President Xi Jinping waves as he leaves Red Square after the Victory Day military parade in central Moscow on May 9, 2025. AFP via Getty Images
All this is why China, as soon as the tariffs were announced, called for a meeting. Not long after, China's finance minister, Lan Fo'an, traveled to Washington, DC to meet with Treasury Secretary Scott Bessent. The meeting was held in the basement of the International Monetary Fund and, at China's insistence, was kept secret.
This meeting paved the way for last week's confab in Switzerland, at which China made some major concessions, reducing its tariff rate on US goods to 10% and, even more important, promising to stop the flow of deadly fentanyl into the US.
In response, the US has decided to temporarily release its chokehold on China's economy. The tariff on China's goods will drop to 30%, enough to generate billions in revenue for the US, while giving a little breathing room to that country's exporters.
5As a condition for pausing those tariffs, China has promised to stop flooding the US with fentanyl and the materials used to produce it. AP
Trump has learned three things from the current slugfest with Xi Jinping.
First, he has been reminded that China always cheats.
China's negotiators in Switzerland admitted that they did not honor their original trade agreement with Trump, signed in January 2020, because Biden was weak.
"The Chinese delegation basically told us that once President Biden came into office, they just ignored their obligations," Bessent reported. "We had an excellent trade agreement with China, and the Biden administration chose not to enforce it."
Trump's tariffs forced Xi Jinping's negotiators into a second big reveal when, for the first time, they linked fentanyl to the tariff wars. They would stop the outflow of the deadly drug and its chemical precursors from China, they indicated, in return for tariff relief.
This is an astonishing admission on Beijing's part, and one that should anger every American, given that the death toll from fentanyl overdoses is approaching half a million.
5According to US Treasury Secretary Scott Bessent (above), under Trump's predecessor, Joe Biden, China essentially ignored its tariff agreements with the US. AFP via Getty Images
For years on end, the Chinese authorities, who oversee a high-tech surveillance state without parallel in the history of the world, have falsely claimed that they simply had no idea where in China the drug was being produced. Instead, they deflected blame onto the US, saying that fentanyl was solely America's problem.
Now, by linking fentanyl to tariffs, they have confirmed what many already suspected: China could have shut down the fentanyl trade with the Mexican cartels at any time.
Fear of renewed tariff hikes may finally force China's cooperation, not just in stopping the fentanyl trade, but in ending the laundering of dirty cartel money through China's banks, and perhaps even in revealing the location of the labs themselves. Trump should demand no less.
5Bessent met with his Chinese counterpart, Finance Minister Lan Fo'an, in secret talks to reduce China's tariffs while still allowing Beijing to save face, according to reports. AP
The final lesson learned from Trump's tariff strategy is that mighty China, the Communist giant supposedly poised to dominate the world of the 21st century, is a paper tiger.
In the end, Trump decided not to use America's vast leverage to push China into collapse, with all of the unpredictable consequences that might ensue for the Chinese people and the world. But now he knows he could.
And, equally importantly, the Chinese leadership knows this too. They also know that, this time around, Trump is starting early — still has plenty of time to act if they renege on the deal.
By Steven W. Mosher Published May 17, 2025, 11:00 a.m. ET
Steven W. Mosher is the president of the Population Research Institute and the author of "The Devil and Communist China."
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And Xi knows, just like Iran knows, that Trump can turn on a dime. It is best to keep the deals they make.
Well, well, well. Looks like Trump has been using tariffs more strategically than has been credited. But what can be expected from neoliberal and fake-Keynesian economists?
China flinched when tariffs were quietly lifted on feedstocks from the United States. Now China has blinked by opening trade talks that it refused to do while tariffs were in place. But it is important to note that China did not cave. And there's no good reason to force China to cave. That was never the point.
China is no longer the cheapest country to set up a factory. Chinese affluence really has made other Southeast Asian countries more competitive for supplying the US. China's economic growth projections have slowed considerably over the past decade. And the Chinese government has been forced to rely on growing amounts of stimulus and sovereign debt to meet the lower growth projections. Added to that is the new need to protect Chinese intellectual property which constrains the country's bad behavior.
Another often overlooked aspect of Trump's use of tariffs is to lower trade barriers. Most of the talk has been about boosting manufacturing to produce what we are importing. (And that is an important objective for some strategic technology.) But the ultimate purpose of the tariffs would be to lower trade barriers that prevent export sales of US technical innovations. (Think bans on GMO organisms, restrictions on mRNA vaccines, and prohibitions on genetic therapies. And biosciences is only one area where the US has been barred from trade.) Producing more for export will also rebuild manufacturing.
China blinked
China asked for the Geneva talks.
Welcome to 1984
Is that true? I would think it would have made the news in China if so.
I don't.
That certainly doesn't fit with the economic news I've been seeing, or what the reputed international economic forecasting organizations have to say. One may question, however, a lot of news about China that originates in the USA. At least China has not received the kind of bad news from Moody that the USA just has.
Arvo... hmm the Chinese economy is certainly wobbly at the moment... especially youth unemployment, factories closing and massive disruption in the property market with large companies collapsing as in Evergrande..consumers are also cutting back and watching their spending...
China is also losing quite a few large foreign owned companies who are now turning to India and other Asian countries where the cost of labour is cheaper eg..Apple, Mattel, Microsoft, Black and Decker, Nike etc...and also less political tensions etc dealing with China...
So the bottom line here is China is in economic trouble and we to are looking at alternative markets like many other countries especially with tariff wars developing...who knows where that will end up..
Well if I'm living in a disaster I certainly don't see it or feel it, or even hear about it. Somehow I don't think China is going to go bankrupt, or that my lifestyle is going to have to change.
Not saying it is a disaster but things have taken a down hill turn re the economy as a whole...
Evening..on a high speed train in China at the moment.. people are shocked when Westerners speak Chinese....the guy is in Shing Jang?..and have been in Chongqing...the wonders of YouTube..😁
???
I am watching a documentary on YouTube on China..😊 plus everywhere else in the world..an easy way to travel without leaving home..
LOL. Okay, now I understand.