Trump wants to be in the news always. That is one way for him to play his business strategy. One day he says something that explodes and on the following day he dampens the fire by stating that he is ready for a deal. Creating chaos and seeks solution from the targets happen to be his modus operandi.
Let us discuss this matter taking one country: China.
Originally tariff was 20% later Trump came out with a math stating that China notionally
charging 67% on export to USA, therefore he is adding half of that sum, i.e. 34% making a total of 54% as tariff rate.
Now he comes with another slab of 50% over the above. At the end of the day the
US consumers have to pay a staggering 104% as import duty for China products.
China on the other hand imposed reciprocal tariff at 34% and let it play out for some time. Trump comes with a bland statement saying China is imposing counter Tariff on USA. He says “I want a deal not counter tariff” what is happening exactly is the question in the minds of observers of business strategy amid geoeconomics.
The fact of the matter is, USA is broke. It needs money; printing currency is no longer an option. Imports are more than exports. How to finance the trade deficit? Then comes somewhat of a silly statement from Scott Bessent who announced that tariff hikes set to bring in US$ 300 to 600 billion revenue that could offset the tax cuts proposed where the beneficiary is not blue colour workers but the wealthy!
Do not fall for this kind of arguments. Tariff has never helped the importer. In a way it might help the exporter to find alternate market. The famous Economist Jean - Baptiste Say put it bluntly, ”Supply creates its own demand”. Now let us look at the trade maths. China-USA trade amounts to US$ 582 Billion while China GDP is estimated at US$ 18.8 Trillion giving a little above 3 percentile stake for America.
Can China find alternate market? Yes Of course! Recently China concluded a duty free trade with Serbia. If this to be extended to the EU as a whole, China could easily negate the US buying power over her. Still we have to give credit to Trump; he wants a deal not a conflict. There is a method in his madness. One concession China can afford is, to convert the present treasury holdings estimated as US$ 761 Billion end January, 2025 to long term securities. That postpones interest payment to a longer date giving somewhat of a breather.
But what is the reciprocal concession Trump has, that could make matters easy and smoothen the geoeconomics tension between these two great powers?
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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