After his April 2 “Liberation Day” announcement of tariffs on most of the planet unleashed stock and bond market chaos, President Donald Trump backtracked. For now, his tariffs are focused on the People’s Republic of China.
What exactly Trump’s aim is with his trade war against Beijing remains unclear. Is it reducing the United States’s substantial trade deficit with China? Is it bringing manufacturing back to the U.S.? Is it generating income for our deeply indebted federal government (even though Trump insists tariffs aren’t a tax)? Is it righting financial wrongs committed by China since it was admitted to the World Trade Organization in 2001?
It’s impossible to say since Trump and his surrogates have haphazardly proffered all those arguments without clarifying which objective is the main or most important one. Whatever the economic or political wisdom of Trump’s trade war with Beijing, White House messaging in this rising crisis has been undisciplined and confusing.
Nevertheless, the Chinese Communist Party got the message and is pushing back. Beijing’s responses have ranged from mocking stereotypes of fat and lazy Americans on social media to citing Chairman Mao Zedong’s anti-American rants from the 1950s while U.S. and Chinese troops battled in Korea amid chants that the Chinese “don’t back down” and Beijing plans on “total victory.”
It’s easy to dismiss such intemperate antics as standard Communist bluster, but there’s no denying that China feels it’s at an advantage in this new trade war of Trump’s choosing. The president crudely boasted that countries worldwide were “kissing his ass” to reach new trade deals with Washington, D.C. Beijing isn’t in that lineup. Last month, in his tempestuous Oval Office meeting with Ukrainian President Volodymyr Zelenskiy, Trump famously taunted his guest, “You don’t hold the cards,” adding: “You’re gambling with World War Three!”
Now, it may be Trump who misread the hand he’s holding. America’s president might be the one who’s gambling with World War Three without realizing it.
In theory, America is at an advantage in any trade war with China since the surplus nation whose exports fuel that imbalance faces the bigger challenge. Last year, Chinese exports to the U.S. were valued at $440 billion. Simply put, if our country has a substantial trade deficit with yours, anything we do to reduce our purchases of what you sell us will hurt you more economically than us.
In practice, however, decoupling the interconnected trade relationship between the U.S. and China that’s grown over the past generation is exceptionally challenging. The second and third-order economic effects, including unprecedented supply chain disruptions, may be impossible to predict. Moreover, Beijing’s willingness to strike back against the American economy must not be underestimated. Two experts recently assessed that “all indications are that China will rely even more heavily on its new economic weapons,” with the CCP aiming “to build negotiating leverage by inflicting highly targeted damage to a small number of high-profile U.S. firms and industries.”
Already, Beijing is reaching out to the European Union as a counterweight to trade losses with the U.S. While it’s premature to suggest any emerging trade alliance between China and the EU, Americans would be foolhardy to underestimate European anger at Trump over his capricious trade policies plus his administration’s stern lecturing to EU audiences about their internal politics, which disturbs even many Atlanticists.
It’s therefore not surprising that Beijing mouthpieces this week are emphasizing that theirs is the second-largest economy on Earth and China can cope with any Trump trade war: “the sky won’t fall.” That may be unduly optimistic, yet it appears that Trump has woefully underestimated China’s determination to hold fast in any trade war with America.
Moreover, the Trump administration is ignoring the serious risks of a trade war with China devolving into a real war.
If the CCP views its hold on power as threatened by Trump’s tariffs, we should not expect Chinese pushback against us to be limited to trade. For all his reality TV-style tough talk, Trump doesn’t grasp that by economically putting the Chinese Communist regime on “death ground,” as China’s ancient warrior sage Sun Tzu put it 2500 years ago, he is risking a full-spectrum conflict with Beijing, including a shooting war.
There’s already turmoil in Beijing in high-ranking military circles. The leadership of the People’s Liberation Army was breathing fire even before Trump announced his tariffs. Shortly after Trump’s second inauguration, top officials of the Central Military Commission, Beijing’s top military decision-making body, urged heightened readiness for war in the new year. One of those bellicose voices was CMC vice-chairman Gen. He Weidong, who disappeared shortly thereafter. As the PLA’s No. 2 official, He is one of the most powerful people in China, an intimate of President Xi Jinping. Yet, He disappeared from public view for two months amid reports that he was fired, making him the first CMC uniformed vice-chairman ever to be relieved. The cause of this top-level military-party tumult in Beijing may be related to international events.
Regardless, it’s not reassuring that the PLA leadership is undergoing a purge as tensions mount between Beijing and Washington over trade and tariffs. After all, there’s ample historical precedent for a trade war turning into a shooting war. To take the most notorious example, President Franklin D. Roosevelt unleashed economic warfare against Japan to induce better behavior from Tokyo (ironically, he wanted to punish Japan’s aggression against China). Rising sanctions culminated in a U.S. freeze on Japanese assets in this country in late July 1941, followed by an embargo on oil exports to Japan. Britain and the Netherlands soon followed suit, devastating the Japanese economy, which was wholly dependent on imported oil.
Japanese military leadership viewed Roosevelt’s move as a declaration of economic war that put the country on “death ground.” Tokyo decided to seize oilfields in the Dutch East Indies (today Indonesia), requiring Japan to neutralize U.S. and U.K. air and naval assets in the Pacific first. Thus, Japan’s Dec. 7, 1941, attack on Pearl Harbor and America’s formal entry into World War Two were born.
That’s a worst-case scenario, but history is littered with examples of unwise economic warfare making matters worse. In 1906, Austria-Hungary unleashed harsh sanctions on its neighbor, little Serbia, hoping to bring that troublesome Balkan kingdom to heel. Since most of Serbia’s exports involved swine, this was known as the “Pig War.” It failed to curb Serbia and only pushed it further into Russia’s orbit. This bad blood between Vienna and Belgrade culminated in the June 28, 1914, assassination of Archduke Franz Ferdinand in Sarajevo, Bosnia, by gunmen linked to Serbian intelligence, birthing the First World War.
The stakes are higher now between the U.S. and China, both nuclear powers. The odds of a shooting war starting in the Western Pacific by 2027, perhaps earlier, are rising. Regular PLA air and naval moves around Taiwan, in practice for a blockade of that island, are growing in size, intensity, and frequency. The latest Chinese military operation, Strait Thunder 2025A, took place over two days at the beginning of this month and involved the PLA deployment of 135 aircraft, 38 naval vessels, and 12 other vessels surrounding Taiwan. Significantly, Beijing terms its aggressive military moves “drills,” not “exercises,” implying that the PLA is training for a real-world move against Taiwan.
How destructive to the global economy any such war would be was explained last week by Adm. Sam Paparo, the commander of U.S. Indo-Pacific Command, as a shattering of the global economy. For America, any war over Taiwan would mean “a 25 percent reduction in GDP in Asia, an effect of 10% to 12% GDP reduction in the United States, unemployment spiking at 7 to 10%” above normal levels “and 500,000 excess deaths of despair,” to say nothing about combat casualties or the possibility of nuclear war.
TRUMP IS TO BLAME FOR SELL-OFF IN US TREASURYS
Perhaps the most ominous aspect of Trump’s trade war with China is that it removed what everyone assumed was a break from Chinese adventurism. While Xi’s commitment to reuniting Taiwan with the mainland is not in doubt, doing so by force would tear asunder the interconnected relationship between the Chinese and American economies, even causing a global depression.
America’s president has already accomplished that by himself.
John R. Schindler served with the National Security Agency as a senior intelligence analyst and counterintelligence officer.
