OPINION: What Not to Do About Trump’s Trade War

For those of us who have been supporting Ukraine, US President Donald Trump’s policy on Russia is both highly disturbing as is the strain his policy is placing on the alliance with Europe. Europeans are angry, and now they face a trade war with the US.

This anger and resentment is fomenting a desire among many to sever Europe’s ties with the US, with some suggesting an almost suicidal way forward. Stimulated as much by bitter anti-Trump Europeans as by Chinese propagandists and President Xi himself they want to create a common, Sino-European anti-US front.

“China, EU must work together to defend globalization,” Xi told the Spanish PM Sanchez during his recent visit to Beijing.

WUMAO, China’s 50-cent army of state propagandists’ campaign is aggressively pushing this idea based on a two-fold strategy:

• Focusing on how “stupid” Trump and his advisors’ plan is as it will bring destruction of other countries, especially Europe.
• Assuring Europeans that China has always been a reliable partner, and it is better to have an economic deal with China than with an unpredictable Trump administration.

Just for clarity and record we should not forget that China is led by an anti-Western authoritarian regime that supports Russian regime in its war on Ukraine.

What about Beijing’s support to Moscow?

China is arming Russia with ammo and computer chips for its missiles, and is enabling Russia to circumvent Western energy sanctions allowing Putin the get revenue from oil exports to continue his war against Ukraine.

As Gen. Christopher G. Cavoli, the Supreme Allied Commander & Commander of US Troops in Europe reminded everybody, at the recent Congressional hearing:

Other Topics of Interest

Italy Backs Alexander Stubb as EU Envoy for Ukraine-Russia Peace Talks

Italian Prime Minister Giorgia Meloni has thrown her support behind Finnish President Alexander Stubb to serve as the EU’s special envoy for peace negotiations between Russia and Ukraine. Meloni will formally raise Stubb’s candidacy at the G7 summit in France, arguing that the envoy must hail from an authoritative nation with transatlantic ties and a understanding of the conflict, while remaining outside the direct rivalry of the EU’s largest states.

“China provides Russia with moral support because it justifies the violation of another country’s sovereignty.”

That alone would be a political and moral reason not to go for a “deal with China against Trump.”

China’s economic reality

Closer economic “cooperation” China would be in fact rescuing / saving a failing Chinese economy, because by all indicators it suffers from inherent structural problems that has brough Beijing’s economy close to a serious bust.

China’s economy is still export-driven – although exports per se are a smaller share of GDP than 10 years ago. It is now around 20% based on China’s own “unreliable” data -they conceal a lot - but it is still mainly export-oriented.

Yet their consumption is not growing fast enough to swallow all those Barbie dolls and MAGA caps., because of several fundamental issues:

• The demographic crisis caused by China’s one-child policy over the past 30 years means the key “under 40” group of consumers is not growing fast enough as society is aging.

• China suffers from capital flight — net foreign direct investment fell by $168 billion last year, the biggest drop since 1990 draining large amounts of cash.

• The Chinese government over uses exorbitantly expanding the money supply (printing cash) to stimulate consumption. Currently almost five times the rate of the US on a monthly basis which drives asset prices up out of the reach of young people to spend, the circle closed.

• Trade tariffs constrict margins that are already razor-thin because of declining consumption, which results in more Chinese manufacturer bankruptcies and job losses.

The only way for the Chinese economy to get going is to sell domestic production abroad.

It will turn to other markets in Asia, Europe and the rest of the world, but these are unlikely to be large enough to compensate for losses in trade with the US and these areas in Trump’s tariff crosshairs and are likely to prefer to seek their own agreements with the US.

China’s biggest economic proble

The largest problem the Chinese economy faces and the reason they may not use a currency devaluation, the simplest way to cushion the impact of tariffs, is the fear of rattling the domestic economic and financial system which is in a very fragile state because of the huge property bubble connected to local government debt.

So a deal between China and Europe would be about dumping Barbie dolls and MAGA caps on the European market with nothing much in return.

The EU will face the same Trump-imposed tariff problems as Beijing and where to find alternative markets for European produce but those who support a deal with China hope that Porsches, Louis Vuitton and others will find buyers in China will need to think again.

Porsche’s China sales dropped by 42% last quarter, while North American sales surged  by 37% to a record-breaking 20,698 units last quarter;  sales for LVMH, Louis Vuitton’s owner also dropped amid China’s weakness.

The bottom line is any deal with China would be primarily Beijing’s interest not Europe’s. It would be saving China’s economy – and by extension Russia’s.

Their “alliance” is the biggest threat to the West, that did not start with the 2022 Russian invasion of Ukraine — it started more than a decade earlier.

Zbigniew Brzezinski, former US National Security Advisor made a  prophetic warning 27 years ago:

“Potentially, the most dangerous scenario would be a grand coalition of China, Russia, and perhaps Iran, an ‘anti-hegemonic’ coalition united not by ideology but by complementary grievances.”

“It would be reminiscent in scale and scope of the challenge once posed by the Sino-Soviet bloc, though this time China would likely be the leader and Russia the follower.”

The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.