● Trade War Escalates, Illusions Shattered
US-China Trade War and the Essence of ‘Tariffs’: Re-examining the Illusion of Free Trade
Key Takeaways from This Article
In this article, we comprehensively cover keywords and issues in economics, global trade, and international politics, including:
- The essence of the US-China trade war
- The meaning of tariffs
- Robert Lighthizer’s trade strategy
- The illusion of free trade
- US manufacturing, jobs, inequality
- China’s tactics and the G2 strategic game
- Legal basis like Super 301
We look at these topics through historical, structural, and political lenses, highlighting the US-China coexistence and strategic conflict.
1. The Global Economy Linked by Tariffs: Trump and Lighthizer
- Tariffs are synonymous with Trump’s trade policy.
- His administration raised tariffs aggressively, even on allies, branding China as a “thief.”
- Robert Lighthizer, former USTR, was the main architect.
- His book The Illusion of Free Trade claims free trade is a myth and the US is a victim.
- His philosophy shaped the Trump trade war, built on decades of experience since the Reagan era and Super 301.
2. The Structure and Timeline of the US-China Trade War
- In 2017, the US began probing China’s unfair trade practices.
- By 2018, a full-blown trade war erupted, lasting through 2019.
- A first agreement was signed in January 2020, but COVID-19 derailed follow-up negotiations.
- Biden largely inherited Trump’s strategic posture, replaying tactics like 90-day ceasefires, suspended tariffs, and strategic ambiguity.
- The US continues to pressure China by adjusting tariffs unpredictably.
3. The Reality of Free Trade and the US’s Victim Mentality
- Though the US has benefited the most from free trade, it increasingly portrays itself as a victim.
- Lighthizer argues that every country uses some form of industrial policy and protectionism.
- Causes of discontent include the decline in US manufacturing, stagnant middle-class incomes, rising inequality, and widening trade deficits.
- The “Chimerica” model (Asian production – US capital flow) is under pressure.
4. Manufacturing, Jobs, and the Political Landscape in the US
- Disparity between manufacturing workers in the US vs. countries like China/Germany has fueled anger.
- Electoral maps shifted drastically in 2016, 2020, and 2024 as deindustrialized regions supported Trump.
- The “job thief” narrative is used as political ammunition.
- Despite low unemployment, the deeper issue is middle-class decline and growing inequality.
5. China’s Response, the G2 Strategic Game, and Super 301
- China has become more adept at negotiation: delays, retaliatory tariffs, rare earth controls.
- G2 game: US democracy vs. China’s one-party system → differing negotiation logics.
- Accusations of unfair trade, currency manipulation, and IP theft justify tariff hikes.
- Super 301 gives the US President broad authority to retaliate economically.
- The US uses trade tools flexibly to influence global economics.
6. Limitations of Free Trade, and the Irony of Values
- Free trade theory clashes with real-world values like human rights, environment, labor, IP, and security.
- Definitions of “unfair trade” are subjective and politically used.
- IP rights and tech leaks are core disputes.
- Strategic decoupling between the US and China is accelerating → raising risks of supply chain shocks and de-globalization.
7. The Future of the US-China Relationship and the Global Economy
- Full decoupling is avoided, but derisking and strategic realignment are real.
- Hegemonic rivalry and economic security concerns will fuel continued conflict.
- US strength lies in military power, dollar dominance, and rules-based order.
- Global trade order is shifting amid the mix of globalization and economic nationalism.
< Summary >
- The US-China trade war is rooted in national interest, inequality, and political dynamics.
- Trump and Lighthizer use tariffs strategically to revive manufacturing and US dominance.
- Free trade’s flaws are increasingly exposed: unfairness, IP issues, labor/environment values.
- Despite high interdependence, US-China tensions will continue through recurring conflict cycles.
- Global uncertainty remains in trade, the dollar, supply chains, and sustainability.
[Related Articles…]
- The impact and implications of Trump’s ‘tariff strategy’ on the domestic and international economy
- G2’s ‘Strategic Decoupling’, Global Supply Chain Restructuring and Future Prospects
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● Cash is king-Trump’s tariff gamble.
Global Economic Scenarios: A Comprehensive Summary of Key Variables in US-China Negotiations, Dollar Weakness, and the US Treasury Market
This article covers topics rarely heard elsewhere, including ‘controversies over negotiating power in a nation with a leadership vacuum,’ ‘the reality of US-China trade negotiations,’ ‘dollar weakness and shocks to the global bond market,’ and ‘the reality of US economic growth rates and stock valuations.’
In particular, it provides an easy-to-understand summary of key economic issues, including changes in US Treasury bonds, exchange rates, growth trends, and investment sentiment.
I recommend a complete reading of the entire article as it highlights important economic trends that you don’t want to miss.
The Essence of Global Negotiating Power: The Issue of a ‘Country Without a President’ and the Limits of External Negotiations
- Transactional and diplomatic power of countries lacking leadership
In countries without a president or head of government, the decision-making structure is often not solid when negotiating with superpowers like the US or China.
In the face of US trade policies and diplomatic friction, ‘interim’ countries find it difficult to make sharp rebuttals or express strong positions.
Amid ongoing US-China conflicts, small to medium-sized countries are often relegated to being allies or passive mediators.
- Actual Attitudes in US-China Negotiations
Recently, both countries have taken a step back while testing the other’s intentions, and then resumed aggressive tactics at any opportunity.
In particular, the US-China trade dispute and semiconductor hegemony war follow a pattern of pausing briefly and then reigniting, making the term ‘truce’ meaningless.
The US seems to be taking a hard line until it establishes a structural advantage, while China is not stopping its counterattacks.
Direction of Dollar Weakness & Risks in the US Treasury Market
- US Dollar Weakening Strategy
The US government may try to ‘induce a weaker dollar’ to improve the current account and trade balance, secure global competitiveness, and correct trade imbalances with specific countries.
Historically, artificial dollar weakening attempts initiated by the US government have caused significant disruptions in the global exchange rate market.
This is closely linked to major economic keywords such as ‘exchange rate fluctuations,’ ‘global investment sentiment,’ and ‘monetary policy shifts.’
- Trigger Points in the US Treasury Market
What if the US suddenly declares a ‘dollar weakening’ drive?
Global investors may question the ‘safe haven’ status of US Treasury bonds and engage in large-scale selling.
A US Treasury bond sell-off, i.e., a ‘massive capital movement,’ could lead to soaring interest rates and increased concerns about a US economic downturn.
Recently, central banks and institutions have been observed to be selling some of their US Treasuries for ‘rebalancing’ and risk diversification purposes.
There are still financial risks like ‘hidden bombs’ in the US bond market.
Signs of Low Growth and Low Valuation, and Investment Attractiveness
- Limitations of Growth Rate
The US economic growth rate in the first quarter of 2024 turned ‘negative.’
While it has recovered 70% from the low point after the pandemic decline in 2020, it faces challenges in returning to rapid growth due to supply chain disruptions and interest rate hikes.
While the growth rate is expected to bottom out and rise again, it will not be like the previous era of high growth.
- Valuation Multiples and Asset Attractiveness
Amid concerns about a global economic slowdown, the valuation of US and Korean stock markets has risen to a level of ’20 times.’
Considering the previous gains, it is difficult to consider them undervalued anymore.
In cases where prices have risen without improvements in performance or fundamentals, the attractiveness of new investment is weakened.
Internal Risks: Remaining ‘Bombs’ and Investment Strategies
- Potential Landmines in the US Economy
There are many unresolved major risks that led to the economic downturn, such as the US Treasury bubble and the debt ceiling issue.
Capital outflows from emerging markets, global financial instability, and the ‘aftermath’ of the real estate and corporate bond markets are not completely over either.
It is time to pay attention to the risk signals from economic news, fund managers, and financial institutions.
- How Should We Respond with Investment Strategies?
The intuition that ‘there is no attractiveness’ and ‘everything has come’ is working realistically.
It is necessary to increase cash holdings, diversify investments to prepare for increased market volatility, and maximize the importance of risk management.
< Summary >
The latest global economic trends are a complex mix of crises and transitions, including passive negotiating countries, superficial US-China truces, attempts to weaken the dollar, US Treasury risks, the end of the low-growth-low-valuation era, and the existence of hidden economic bombs. Individual investors must develop risk management-focused strategies to prepare for significant volatility.
SEO Optimized Summary
Summarizes key global economic outlook points.
Includes key keywords related to the economic outlook, such as the US-China trade war, dollar weakness, US Treasury market risks, low-growth/low-valuation environment, and remaining financial risks.
Describes the limits of negotiating power in a country without a president, dollar exchange rate change patterns, and the reality of economic growth rates and asset valuations, providing essential information for investment strategies.
The current global economy is in a ‘crisis and transition.’ Investors should prioritize risk management, such as diversification and increasing cash holdings.
(SEO Keywords: Global Economy, US-China Trade, Dollar Weakness, US Treasury, Investment Strategy)
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