Even as Tariff Man, as Trump likes to refer to himself, focuses only on disruption, Beijing is evidently operating on a higher level. China is outplaying the United States on two fronts.
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First, while Trump is on the verge of slapping tariffs on almost everything the U.S. imports from China, Beijing is picking and choosing wisely. It went to town on American soybeans, in part because it knew that Brazil and Argentina could provide ample alternative supplies. But it has left untouched other American exports that are more difficult to replace. China could, for instance, force its state-owned airlines to immediately shift from buying Boeing to European-based Airbus, but those companies would run into trouble accessing the parts and services needed to keep their costly existing fleets running. Beijing has therefore mostly spared the aircraft sector from retaliation thus far.
Second, Trump has no real mitigation strategy to help the Americans facing the entirely foreseeable costs of his policies. Yes, he’s giving out tens of billions of dollars in agricultural subsidies—but that is, of course, a cost borne by Americans, not international rivals. His separate trade restrictions on nearly $50 billion in steel and aluminum imports have only worsened the effects of his fight with China; these restrictions have burdened American farmers by raising the cost of the equipment needed for harvesting or storing the crops they are now unable to sell abroad. And he’s compounding this short-term pain with possible long-term damage to previously healthy international relationships: Those steel and aluminum tariffs have mostly targeted trade from allies such as Europe, Canada, and Japan—not China. He also conducted a needlessly contentious renegotiation of the North American Free Trade Agreement, and has threatened tariffs on tens of billions of dollars’ worth of Japanese and European cars.
By contrast, China is helping its citizens by making new friends. One way to offset the rising prices to Chinese consumers otherwise stuck buying American is to lower their costs if they switch. On average, it is now 14 percent cheaper in China to buy something from Canada, Japan, Brazil, or Europe than it is to buy something from the United States. Beijing is making it worthwhile for its consumers to develop new commercial relationships. And once those new ties are formed, the Chinese may not bother to switch back.
When Trump first began imposing tariffs in early 2018, his key trade strategist, Peter Navarro, infamously said, “I don’t believe any country in the world is going to retaliate.” Navarro was wrong, of course, as foes (China, Russia) and friends (European Union, Canada, Mexico) alike all immediately retaliated against American exports.