US Poker Strategy
The United States has initiated a tariff-driven economic confrontation with China, banking on its apparent strength to win. On paper, the US seems formidable: it boasts the world’s largest economy, valued at $29 trillion, with imports accounting for just 10.5% of GDP and imports from China’s only comprising 1.8% ($524 billion) of US GDP. By contrast, China’s economy stands at $19 trillion, although 27% larger than the US on a purchasing power parity basis, with exports comprising 19% of its GDP and the imports from the US representing 0.7% ($143 billion) of its GDP. So, China’s economy is more vulnerable to the tariff war; although, exports to the US are only 2.7% of China’s GDP, which is well below China’s annual GDP growth rate.
However, this initial advantage may be deceptive. The US relies heavily on critical imports from China, including minerals, semiconductors, industrial machinery and equipment, solar panel and EV batteries, pharmaceuticals, as well as consumer goods. As an example, China provides the US 73% of smartphones, 78% of laptops, and over 40% of generic drugs. In addition, China will play an important part in most of the US’ critical supply chains.
China’s Long-Term Resilience
China also depends on imports from the US, including semiconductors (some already sanctioned) and related design tools, aerospace engines, pharmaceuticals, refining technologies, LNG, soybeans, and seeds. However, unlike the US, Beijing has been implementing a multi-year strategy to reduce reliance on American goods and has already made significant progress.
China’s ability to endure short-term pain may prove decisive. They are capable at playing the long game, Beijing can afford to lose a few hands of poker while maintaining its focus on broader strategic goals. In contrast, internal pressures in the US have already tested Washington’s resolve during previous trade confrontations.
Alienating Allies: A Strategic Misstep?
One critical flaw in America’s approach is its simultaneous alienation of all allies. By employing a tariff war against all nations — who collectively account for 74% of global GDP—the US risks isolating itself in a world where China’s economic influence continues to grow. This miscalculation could ultimately undermine Washington’s ability to rally international support against Beijing.
On Wednesday, it looked like Trump temporarily backed down after significant external pressures and now appears to be trying to isolate China. If the rest of the world is smart, they won’t let Trump put the toothpaste back in the bottle and successfully isolate them. All other countries need China not only for its capabilities and what it currently produces but also to offset this reckless use of power by the US.
Who will win the tariff poker game and not just the first few hands?
REBOOT 