US Tariffs: China in the Crosshairs – The American Spectator | USA News and PoliticsThe American Spectator

Trump’s tariff hammer has caught global markets off guard and plunged them into severe turbulence. It’s hard to find bearings in the fog of volatility and panic. Yet, a trend is slowly taking shape: The U.S. is targeting China’s trade dominance with its harsh policy.

First, the good news: The tariff shock initiated by the U.S. government is, for now, driving down living costs — at least where states aren’t using a crowbar to enforce green ideology and eliminate energy capacities, as Germany has with its nuclear power. Prices are dropping across the board — oil, for instance, by about 15 percent since the start of the year, heralding deflationary days. (RELATED: Lights Out in Germany)

While stock markets suffered a dramatic collapse, with the S&P 500 tumbling over 10 percent since the tariffs were announced, oil, gasoline, and agricultural commodity prices also went into free fall, offering initial relief to the battered household budgets of the private sector.

Is Trump playing the “Main Street over Wall Street” card by sidelining the markets? It’s entirely possible that the White House is prioritizing the mood in “Blue Collar America” to clinch the midterm congressional elections and shore up political power. (RELATED: Why ‘Liberation Day’ Frightened Democrats)

You cannot claim that the Trump administration is giving shareholder wealth special treatment, given the bloodbath on the exchanges. It’s clearly willing to stomach heavy corrections to pursue its domestic and geopolitical goals simultaneously: wiping out the twin deficits of trade and fiscal imbalances while staging a comeback for domestic industry. (RELATED: The Dismal Science and the Trumpian Tariff Hullabaloo)

Trump’s Strategy: Pressure as Leverage?

Countries with negative trade balances with the U.S. — like the U.K., France, and Spain — face a problem: Trump’s tariffs further restrict their access to dollars needed to refinance their dollar-denominated debts.

With the end of USD LIBOR in September 2024, euro-based collateral will continue to lose its credit standing — the era of conjuring dollars out of thin air is nearing its close. It’s increasingly clear that Trump is exerting maximum pressure on America’s trading partners.

How far potential escalations might go remains uncertain, but the Trump camp seems dead-set on continuing the trade war it’s ignited. Is this an attempt to force countries with hefty trade surpluses into bilateral negotiations to shrink the U.S. deficit? Or is the White House truly going all-in, aiming to collapse the foreign credit machine — the Eurodollar market — by abruptly cutting off dollar liquidity, thus forcing its two major geopolitical rivals, the European Union and China, onto the defensive?

China’s Export Engine

China these days gives off the vibe of a faltering giant. Sure, the real estate crisis and the country’s demographic collapse have vanished from media coverage. But the Communist Party in Beijing can barely mask its own economic weakness and credit woes.

Time and again, fiscal packages and liquidity injections — like the 200 billion yuan pumped in October 2024 — are deployed to buy breathing room for a banking sector buckling under deflationary pressure and a persistent wave of bankruptcies (a policy we know from the last financial crisis and one neither the U.S. nor Europe has fully overcome).

China’s export sector remains the regime’s political ace. It has nurtured this seemingly unbreakable economic engine with export subsidies and an artificially undervalued yuan to keep its labor market stable and nip domestic unrest in the bud. Just a reminder: China’s trade surplus in 2024 nearly breached the stratospheric mark of one trillion U.S. dollars. That figure looks even more staggering when set against global economic output, pegged at around 110 trillion U.S. dollars. (RELATED: False Justifications for Trump’s Tariff Policy)

Nearly every hundredth unit of currency circulating worldwide flows through the ever-widening bottleneck of China’s trade surplus — a state of affairs causing extreme mercantile distortions globally, as the Chinese central bank consistently undermines the hinge function of a free currency market and systematically devalues the yuan.

Trump’s tariffs zero in on this politically orchestrated surplus. Yet China fights back with its trade policy toolkit: Since March 10, 2025, it’s slapped 15 percent tariffs on U.S. goods like soybeans, with 34 percent counter-tariffs on all U.S. imports starting April 10, 2025. The yuan was cautiously devalued Monday morning European time — a chess move against the falling dollar and an effort to defend its trade stance. The Party leadership is signaling loud and clear that it’d rather engage in monetary brinkmanship than cave on trade.

No Relief in Sight

This tug-of-war is taking on sweeping dimensions. Trump’s tariffs also target China’s trade satellites, Vietnam and Thailand, to plug export loopholes — a lesson from his first term when third-country workarounds diluted the tariff impact.

Treasury Secretary Scott Bessent flatly rejects tariff relief, while advisor Kevin Hassett talks of negotiations with over 50 countries. Markets remain unsettled amid these contradictory signals, though bond markets show no signs of stress yet — a deceptive calm?

That could shift if stock losses spiral into a fiscal crisis, especially for nations like the U.K., France, and Spain. Without LIBOR, they face a dollar-financing dilemma: Their debts, running into hundreds of billions of U.S. dollars, could turn into a fiscal anchor dragging down the Eurozone as access to cheap dollar credit dries up.

READ MORE from Thomas Kolb:

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