By Eric Vandenbroeck and co-workers

Today's 'Tariff War'

A reason why President Xi is seen smiling when faced with Trump's onslaught is because China, during the last decade, has faced this many times before and always came on top of it which led to President Xi Jinping’s vision for the “Great Rejuvenation of the Pan-Chinese Nation” and “China Dream” emphasizes a shared ancestry and cultural identity among ethnic Chinese, both within China and abroad.

Whereby most recently a so-called 'tariff war' ensued when on on Friday April 11, Beijing issued a sharp rebuke of the Trump administration's trade tactics. In a post from its official account, China's Ministry of Foreign Affairs accused the U.S. of "capricious and destructive behavior" and vowed not to bow to American pressure. The statement follows days of tariff announcements and warnings from both countries.

After three months of insulting, tariffing, and even threatening to annex some of its best allies, the Trump administration suddenly needs some help.

A tariff reprieve from President Donald Trump sent global markets soaring on Wednesday, with the White House saying it’s been in touch with dozens of countries about striking deals, lining up calls and meetings in the coming weeks.

But one country was conspicuously absent from any outreach: China. Even Xi Jinping might have to persuade his people that the pain is worth it. Rather than a fight on all fronts against the world, this now looks far more like a fight on familiar Trumpian territory: America vs. China.

As the rest of the world received a 90-day respite, Trump escalated tariffs on China, saying the US would now charge an extra 145% on all Chinese goods that arrive in the US. In response, Beijing ratcheted up its tariffs on American goods Friday to 125%, and the country’s leader — who Trump is urgently working to engage — warned China was “not afraid” of a prolonged trade conflict.

In private discussions hours before China announced new retaliatory tariffs, the Trump administration warned Chinese officials against such a move, according to a source familiar with the discussions.

The Chinese were also told – once again – that Chinese President Xi Jinping should request a call with US President Donald Trump.

Instead, US officials woke up to news of increased Chinese tariffs and no request for a leader-level call. Xi also made comments that only dug him in further.

“For over 70 years, China’s development has relied on self-reliance and hard work — never on handouts from others, and it is not afraid of any unjust suppression,” Xi said, according to state broadcaster CCTV, during his meeting with the Spanish prime minister.

An unprecedented trade war between the world’s two economic superpowers is quickly taking shape, with both countries waiting for the other to blink.

Two senior White House officials tell CNN that the US will not reach out to China first. Trump has told his team that China must be the first to make the move, as the White House believes it is Beijing that has chosen to retaliate and further escalate the trade war.

One hurdle, Trump’s team believes, is Xi’s desire not to be seen as weak by making the first move and approaching the US for talks.

Trump, who envisions a grand bargain with China that increases US exports, cracks down on fentanyl exports and restructures TikTok for US users, has suggested Beijing would come around.

“China wants to make a deal. They just don’t know how quite to go about it,” Trump said on Wednesday during an event at the White House. “You know, it’s one of those things they don’t know quite – They’re proud people.”

 

Looking for the proper channel

But for months, US and Chinese leaders have been talking past each other, allowing relations to sour as each country’s overtures go unanswered.

Behind the scenes, official channels at the working level are active, but high-level dialogue has not been happening. Meanwhile, unofficial channels have proven unproductive, according to three sources briefed on the situation, paving the way for a game of economic chicken with a costly and uncertain end.

China’s reliance on strict protocol and desire to prepare Xi for any call of this magnitude is fundamentally at odds with how Trump does business, some current and former officials say, which they point to as the main 'hangup' in trying to get productive talks underway.

China has been trying to set up a back channel like it had with President Joe Biden’s national security adviser, Jake Sullivan, but so far, that effort has been unsuccessful. The US objection, according to officials: The Trump administration has balked at China’s Foreign Minister Wang Yi serving as the interlocutor, suggesting that Wang is not close enough to Xi’s inner circle and cannot be trusted.

Chinese Foreign Minister Wang Yi attends a press conference with French Foreign Minister Jean-Noel Barrot at Diaoyutai State Guest House on March 27 in Beijing. 

Chinese officials have been presented with the specific names of people that the Trump White House would like to engage with instead, but China won’t budge, sources say.

Further inflaming tensions, the Chinese readout of a call between Wang and Secretary of State Marco Rubio earlier this year appeared to misrepresent the contents of the call, Rubio later said.

“That didn’t happen, at least not on the call, or at least maybe their interpreter didn’t want to interpret it that way,” Rubio said of the Chinese claim that Rubio was warned not to overstep himself.

While some communication between the sides has been brokered by China’s ambassador to the US, the dearth of a principal-level channel has been problematic in arranging a call that the Trump administration says is necessary.

Two senior White House officials told CNN that Trump would be happy for communication to begin below the leader-level if it brought about results.

Despite Trump officials publicly saying that Trump will dictate his engagement with Xi – National Economic Council Director Kevin Hassett said on CNBC Thursday morning that Trump “will decide” when conversations begin – it is clear that the ball is in China’s court for the time being.

At least, that’s how Trump officials see it. But that’s not the view in Beijing.

“The door to talks is open, but dialogue must be conducted based on mutual respect and equality,” a spokesperson for the Chinese Commerce Ministry said Thursday. “If the US chooses confrontation, China will respond in kind. Pressure, threats, and blackmail are not the right ways to deal with China.”

Amid the standoff, the White House has sought to prioritize trade deals with Japan, South Korea, and Vietnam to pressure Beijing, a senior White House official said.

Current and former US officials aren’t ruling out the possibility of putting in place an unexpected preparation channel for a possible Xi-Trump call, but former US officials say the key is ensuring the Chinese they aren’t sending Xi in for an ambush — especially after the tongue-lashing Ukrainian President Volodymyr Zelensky received in the Oval Office.

“The Chinese, in any case, are reluctant to put their leader in the position that Zelensky found himself in,” said Danny Russel, a former assistant secretary of State for East Asia and currently vice president of the Asian Society Policy Institute. “They want to ensure that some of the groundwork is laid for a meeting and that there’s some ground rules established.”

 

‘Mutually-assured destruction’

Chinese officials have sought avenues to reach Trump directly, often through business leaders who have his ear.

When Xi dispatched Vice President Han Zheng to Washington as the highest-ranking Chinese envoy to ever attend a presidential swearing-in, Han also took a meeting with Elon Musk.

Han Zheng, left, Vice President of the People's Republic of China, attends Donald Trump's inauguration as the next President of the United States at the US Capitol on January 20. 

Influence in the early days of the Trump administration. Chinese officials had hoped to establish more direct lines of communication with the new Trump administration, using Musk as an intermediary, one person familiar with the matter said. But so far, those attempts haven’t been fruitful.

China has considered kneecapping the operations of blue-chip US companies in China, such as Apple, Tesla, Caterpillar, and Starbucks. Ultimately, according to two sources briefed on the discussions, Beijing backed off that idea – worried that Chinese consumers would revolt and the Chinese Communist Party could lose the potential for lucrative executive backchannels.

But the CCP is still weighing strategic options to hit back against Washington beyond simply raising import duties. China will likely begin buying soybeans and agricultural products from Brazil instead of the US heartland, as it did during Trump’s first-term trade war.

“Look at where they’re blacklisting US companies, hitting US farmers, cutting us off from critical minerals – that’s a toolkit that they’re very comfortable wielding,” said Melanie Hart, senior director of the Atlantic Council’s Global China Hub. “They have experimented with it in many other countries. They’ve been developing it for years. They have a bunker that they’ve been building for this moment.”

Asked what pain threshold either country is willing to bear, sources in touch with both governments couldn’t say. But one thing is clear: How far either country moves into leveraging non-tariff weapons to fight back could determine how dangerous the economic conflict becomes.

Beijing has banned the export of a handful of rare earth minerals required for manufacturing certain goods. Moving to ban the export of all rare earth minerals or selling off the mountain of US Treasury bonds it has amassed would be seen as taking the conflict to the next level.

“If China moves to fully throttle the US economy, all shackles are off,” said a former US official briefed on the state of play. “A trade war of that magnitude is an act of war.”

Which country has more leverage in such a conflict depends on whom you ask. Peter Navarro, Trump’s uber-hawk, has suggested Beijing can’t afford to escalate to that level. Others suggest that’s a naive depiction of an authoritarian leader wielding the full power of a non-market economy subsidized by his government.

“That’s incorrect,” one source in touch with both governments suggested of Navarro’s belief. “This is going to be mutually assured destruction.”

Some experts suggest it’s Xi who has the upper hand, having bolstered his political standing at home and earning more room to maneuver before engaging Trump.

“Xi Jinping is in a much stronger political position as a result of the perceived attacks by the Trump administration, and he is in a better position to convince the Chinese people to absorb whatever economic pain the tariffs may cause,” Russel said.

Matt Pottinger, who served as Trump’s deputy national security advisor, and Liza Tobin, who served as his China director on the National Security Council, described the divide in the Free Press as a “messy breakup” and a “zero-sum contest” whose settlement will bring consequences for the rest of the world. The superpowers, they said, are evenly matched – but have different goals.

“While Trump has seized the upper hand in the trade war, Xi is gaining ground in areas that may be even more consequential: artificial intelligence, advanced manufacturing, and the military might required to seize the most important piece of real estate in the world – Taiwan.”

 

Trump’s first term regrets

During Trump’s time out of office after his loss in 2020, he frequently brooded about the shortcomings of the trade agreements he struck with China during his first term. While he enjoyed a warm relationship with Xi, including a Xi visit to Mar-a-Lago and a splashy Trump visit to Beijing in 2017, their partnership soured in the latter years of his first term.

Trump has bemoaned what he said were weak officials who allowed China to renege on some the agreements it made to purchase large amounts of American goods, including agricultural products. China has cited the Covid pandemic as the reason it did not fulfill the terms of the deal.

Back in office, Trump has discussed striking a more wide-ranging deal with China that would extend beyond trade to other areas of potential cooperation, such as new investments and commitments by China to buy more American products. Complicating that effort is the fact that a first-term trade deal aimed at selling more to China has yielded little result, and Trump’s hawkish national security team previously has expressed reservations about letting Beijing invest more in the US.

Trump also came into office vowing to crack down on fentanyl coming from China to the US. In his first days in office, Trump imposed a 10% tariff on China – along with threats and tariffs on Canada and Mexico – citing the role of Chinese suppliers in the fentanyl trade.

Shortly after a conversation between Trump and Xi in mid-January, the CCP submitted a proposal related to curbing fentanyl production to the US Embassy in Beijing. The embassy did not respond to the proposal, which it privately derided. Beijing was furious, according to a source familiar with the two governments.

Last week, Beijing came forward with a more substantial offer after the administration had been pushing them to do so. But it remains to be seen whether Trump would seriously consider that proposal – and any movement toward a TikTok deal – as a way to knock down tariffs that have risen exponentially and cleaved the two countries’ economies.

“Might Trump’s dealmaking instinct reassert itself and overtake his decoupling instinct?” Pottinger and Tobin asked. “But a comprehensive ‘grand bargain’ that sets aside the US-China arch-rivalry has never been more distant.”

 

 

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