Who Will Come to the Table First, China or the US?
Who Will Call Trump’s Bluff?
Who Will Call Trump’s Bluff?
Unlike the previous trade war that began in 2018, China has been acting quite confidently and swiftly this time. Long-term policy continuity, a centrally planned economy, a highly centralized power structure, and the ability to execute orders along the chain of command - these are all the factors a democratic society lacks but critically important in a time like this.
We’ve seen a lot of top-down geopolitical / macro shit takes that originated from certain ideological biases, and there’s a good chance that you may find this article in that category too. Nonetheless, some facts just cannot be ignored, whether we like them or not. For example, the US has gone from 56% of total global trade before Trump 1.0 took office to circa 20% now, while the EM countries have steadily grown their shares and trade partnerships. Additionally, China’s “dual-circulation” economy model has been largely successful; domestic consumption in China now accounts for more than 50% of the GDP, and the export to US is merely 2.7% of the GDP. This is what I consider the core macro backdrop today.
Recent headlines also provide some great colors in how China is going about the trade war this time: tit-for-tat, prompt response, and calmly deliver one countermeasure after another. They have been preparing for this since 2018, gaming out hundreds of thousands of simulations with the help of mega computing power - one can only imagine how granular and precise the calculations are. The message is very loud and clear - they don’t need the media hype, they don’t exchange vulgar language, and they most likely won’t come to the table first (unless the US opts to play the Taiwan separatist card, then it’ll be gloves off).