What will the Chinese Communist Party do now that President Donald Trump has slapped 145% tariffs on them? Most of the commentariat seems to think they’ll match the United States tit for tat on tariffs, complain mightily, and then quietly put out feelers to cut a deal. And Trump has suggested they already are. Maybe so. That’s what we would do if we were Xi Jinping. But don’t expect Xi to respond the way America would. 

Xi Jinping will let his own people absorb any amount of hardship. And he’s been telling them for years to get ready to “eat bitterness.” He’s also been sanctions-proofing the Chinese economy for years. While he’s not there yet, he’s not helpless either.

Economic Retaliation and Narrative Warfare

China has banned certain rare earth mineral exports, ordered Chinese companies not to buy Boeing aircraft, and placed 125% tariffs on American imports.

It has also enlisted American proxies, of whom there’s no shortage, to make the case that the republic will collapse if Walmart’s everyday low prices go up.  

Beijing will also use the American trade pressure to rally the public.

Xi can’t be seen caving in to the foreigners. If he does, his many domestic enemies might remove him, quite literally.  

Even more fundamentally, the Chinese Communist Party (CCP) is in a battle to the death with the free world. The way the CCP sees things, only one of the two can survive – freedom is an existential threat to communism.

A Strategic Calculation

So, Xi (and his predecessors) have been preparing for war for years. Since at least 2019, state-linked media have said China is in a “people’s war” against the US.

Also, at his instruction, Xi’s military, the People’s Liberation Army (PLA), is now competent enough to throw its weight around inside and beyond the first-island chain. Go about it right, and the PLA can even give the Americans a bloody nose.   

So perhaps Xi Jinping thinks starting a shooting war is a reasonable option? He would have the advantage of surprise. The Americans don’t think he will (or don’t want to entertain the possibility). 

It needn’t be against the US, with all that involves, but maybe Taiwan or the Philippines? This would give the US and everyone else a massive jolt. A trade war and a potential nuclear war are two different things. There will be no end to people blaming President Trump, especially as Xi claims, “You Americans pushed me into it.”  

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Out Come the Wolves

Every Democrat on Capitol Hill, for starters, and many RINOs (Republicans in Name Only) will blame Trump. As will all of Wall Street and most of America’s business class. Recall how many people fretted after 9/11 that the US somehow provoked Osama bin Laden into attacking: “Why do they hate us?” 

It will be even easier when China (and Donald Trump) are involved. Such is Trump Derangement Syndrome.

But are the tariffs on the PRC, high as they are, enough to make war look like a good move for Chairman Xi?  

It may not be the same as the oil and financial embargoes imposed on Imperial Japan in 1941. However, for the CCP, it’s bad enough in its own way. Especially if major or even smaller countries settle their disputes with the US, or refuse to absorb China’s rising exports, which could overwhelm their own domestic industries.

Need for Hard Currency

The Chinese can withstand punishment, but China’s “Ponzi Scheme” economy depends on exports to earn hard currency. And also imports of American and Western technology.  

The CCP hasn’t got half the foreign exchange it needs to meet its US dollar-denominated obligations. Or to buy what it needs, say, Australian iron ore to make steel to build PLAN ships. Nor does it have the US technology that, for example, went into the spy balloon that flew over America in 2023.

And Xi would prefer to keep people employed. China is still a place where 600 million people live on $5 a day, and many others live on less.  

It’s a volatile place. And maybe Mr Trump has more than tariffs and readjusting the trade imbalance in mind. Perhaps this is building to a substantial decoupling from the Chinese market, thus creating free-world and “unfree world” trading blocs.

Even before the tariffs, the Trump administration’s America First Investment Policy was worrying China with its tightened restrictions on inward Chinese investment. And just as bad, clamping down on outbound American investment and tech transfers to the PRC.

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Kinetic Conflict?

The US has never pressured China like this in the 53 years since Richard Nixon’s visit. There’s been a lot of talk but never much real pressure – except during Trump v.1. But that was only for a couple of years and never went for the jugular.

Xi might now count on the Americans losing interest and being placated and strung along with the promise of talks, and easing up.

However, what if the Americans learned their lesson and realized China is already at war with the United States? The US didn’t start this war, but for the first time, it looks like it’s getting ready to fight.

Maybe Xi will figure now’s the time to shoot – or “go kinetic” in today’s jargon. A shooting war may not be how we would respond to tariffs. But we’re not Xi Jinping.

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Author: Grant Newsham