Opinion | Why China can and should go all out against Trump in his trade war

China has all the cards and the confidence; but for the US, the likely outcome is the bursting of the US financial bubble and the dollar’s demise

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Shoppers in Shanghai on February 28. The property bubble has been lanced, people are braced and households have twice as much savings as debt. There is very little economic downside left for China, and no scenario in which it cannot go on. Photo: Reuters

Published: 6:30pm, 9 Apr 2025

China is going the whole hog in response to US President Donald Trump’s tariff war, showing it is prepared to completely cease trade with the United States. The European Union and Canada are stiffening their backs too.

Trump’s tariff salvo is clearly demented, in basing the rates on trade imbalances. If a country’s imports from the US are only 10 per cent of its US exports, Trump interprets it as a 90 per cent tariff – though in his magnanimity, he halves it, ending up with 45 per cent. The twisted logic is that, as long as the US tariff is high enough, trade with the US will be balanced.

But all this will do is reduce trade with the US. Perhaps balance will be achieved once there is no trade on either side. Maybe the road to balancing trade for the US is for its demand to collapse, rather than for its exports to increase.

China has clearly given up hope of a compromise. Its raising of US import tariffs by the same percentage as Trump’s last week shows its determination to go all the way with the US on this. In addition, China has other means of retaliation.

First, China can cancel the gambling licences of casino operators Sands China and Wynn Macau. Gambling is a harmful business anyway. If these American companies leave China, good riddance.

Second, China can cap the app store fees charged by Apple, Google and Microsoft at 5 per cent. They usually charge a commission of 15-30 per cent of revenues. Google is taking the development of its Android mobile operating system (OS) private. Although it has promised to make the full code of future updates public, the decision removes the last incentive for accepting high charges. Given China has substitutes for their platforms, their leaving won’t be much of a loss.