In the last few days alone, we’ve had some of the most epic days in market history, with the announcement of global tariffs resulting in trillions of dollars of destruction of value. That was followed by euphoria as the US President announced a 90-day pause – briefly causing share prices to soar, before plunging again as cold reality caught up with hope and expectation.
For a few days, it was the US taking on the rest of the world – shattering assumptions, alliances and trust in the process. Such were the misgivings that US government bonds plummeted, threatening the very economic foundations of the world’s most powerful state. True to form, as the cracks began to appear, Trump trivialised the havoc he had caused. People “were getting a little bit yippy, a little bit afraid”, he said. For “little bit yippy” read double-digit decline in values of US stocks, and a bloodbath in technology companies’ shares so bad that some tore up major investment plans slated for later this year.
Traders on the floor of the New York Stock Exchange at the opening bell on 11 April. Markets across the world have been in turmoil since Trump first announced the tariffs (Photo: Timothy A Clary/AFP)Planned U-turn?
Trump and his court are difficult to read, because they keep changing their minds. On Thursday, the President said that he was simply trying “to get the world to treat us fairly”, adding that “everybody wants to come and make a deal”. It was all about fairness, agreed US Commerce Secretary Howard Lutnick. Finally, thanks to Trump, “we’re getting the respect we deserve”.
According to the US Treasury Secretary, all of this was part of a cunning plan. “This was his strategy all along,” Scott Bessent told reporters at the White House. Better still, Bessent went on, Trump’s erratic imposition of tariffs on every country on earth, followed by warnings that none should dare retaliate, had paid dividends. “You might even say he goaded China into a bad position,” he said, noting that China had imposed retaliatory tariffs.
Export containers at Qingdao Qianwan Container Terminal on 5 April in Qingdao, China. China’s trade with countries in South East Asia is now larger than with the US (Photo: Han Jiajun/VCG via Getty)
Trump’s miscalculations over the last few days, weeks and months should therefore bear heavily on the mind. During his first presidency, he was itching to take on China, promising that “trade wars are good, and easy to win”. That confidence is shared by Bessent. Comparing Beijing’s situation to a poker game, Bessent exulted that “we export one-fifth to [the Chinese] of what they export to us, so that is a losing hand for them”.
Amongst those holding a losing hand is none other than President Trump’s most vocal supporter and right-hand man – Elon Musk. On Friday, Tesla stopped taking orders in China and even removed the “order” button from its website for models that are made in California, and which will now cost almost double the price if exported to China. Last year, Tesla sold almost $100bn worth of vehicles in China. As Musk spends more time at his day job, he might ponder whether his cheer-leading for Trump was as well-judged as he thought.
Sanlitun commercial area of Beijing on 11 April. The US is important – but not critical – to China’s economy (Photo: Kevin Frayer/Getty Images)While it is true that around 75 per cent of container ships that sail to the US fully loaded come back to China empty, the US is important – but not critical – to China’s economy. In fact, China’s trade with countries in South East Asia is now larger than with the US.
Likewise, planning has gone into food supply chains, both through the development of massive forward deals with farmers in Brazil, for example, but also through the acquisition of farmland by state-owned businesses and by individuals well-connected in Beijing in countries around the world – something that has been a source of controversy in places like Australia.
Peter Navarro, Trump’s senior trade adviser, is a China hawk and the main advocate for tariffs – and has been since the US President’s first term (Photo: Jim Watson/AFP)Beijing gears up
It has been interesting to watch China’s response over the last week or so. The reciprocal tariffs were, in my opinion at least, always going to be applied. Trump’s repeated increases higher and higher is a concern, but it looks like the decisions of a weak leader, reacting in real time – rather than being planned in advance.
square CHINA AnalysisTrump has kick-started America's downfall - and handed the world to China
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That offers an opportunity to frame the US as a bully, willing to use force to get its own way. One should not underestimate the shock, particularly in middle- and low-income countries, at how Trump has brought the world – and the US economy – to its knees. As such, while China has often struggled to make friends as a result of its own strident policies and clumsiness, Chinese foreign ministry spokesperson Lin Jian chose his words carefully when he said that “a just cause enjoys the support of many”.
This all could get a lot, lot worse. So, the real question is whether there is a deal that can be done that can solve the problems that Trump thinks he can see, and which Beijing will be able to agree to. Behind the scenes on both sides, it is fair to say that the jury is out. If Trump proves to be the real deal, and can negotiate the way he says he can, then perhaps we’ll find peace in our time. The fact that the deal he agreed in 2020 was a poor one does not fill many with optimism. It’s time to fasten your seatbelts. We may be in for a very bumpy ride.
Peter Frankopan is Professor of Global History at Oxford University. His books include ‘The Silk Roads: A New History of the World’
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