The Tariff War May Fizzle Out, but Its Impact Will Be Profound

I have been following the tariff war launched by the U.S. president for a week now. A review of domestic and international media reports shows that, as the situation has evolved, the U.S. administration has been unable to withstand domestic and international pressure, and a list of tariff exemptions has been issued. A large number of products exported from China to the United States have received tariff exemptions; the exempted reciprocal-tariff products account for roughly 20 to 30 percent of China's total exports to the United States.

It now appears that this tariff war has been much sound and fury, signifying little, and may ultimately end in a whimper. At present, mobile phones, computers, and semiconductor components are exempted; the scope of exemptions may widen later. It is also possible that China and the United States will eventually negotiate an end to this trade war—one that has frayed the nerves of people worldwide and affected many people's livelihoods—in a manner acceptable to both sides. Although competition between China and the United States will remain fierce going forward, the United States will be the first to be unable to bear the pain of the current uncertainty, just as it did during the COVID-19 pandemic.

Considering that, before the U.S. president took office, Chinese and American traders had already predicted that a trade war would be inevitable and had placed orders in advance, building up ample stockpiles. These reserves are sufficient to last for some time, so the impact of the current tariff war on foreign trade orders is in fact quite limited. As time goes on, opposition within the United States grows louder, U.S. Treasuries, U.S. stocks, and the dollar are all being sold off, and the president will have to make further concessions. I estimate that the eventual additional U.S. tariffs will be very limited in scale, and their impact will be diluted by exchange-rate movements—but the impact of this tariff war will be far-reaching.

A latest Bloomberg Markets Live survey shows that, although the U.S. president has suspended tariffs on many countries, investors are still seeking to avoid U.S. assets in favor of Europe and other developed markets. The survey was conducted from April 9 to 11, with 203 investors participating. After the president announced a 90-day pause on tariffs for most countries, 81 percent of respondents said they planned to maintain or reduce their exposure to U.S. assets. More than a quarter said they had cut their investments by more than they had expected before the president announced global tariffs of up to 50 percent earlier in the month. Under the shadow of the China-U.S. trade war, investors have become far more cautious about investing in U.S. assets.

The markets have been shaken, and global investors are in a state of anxiety; the confidence of consumers and investors will be hard to restore in the short term. Many people have formed an irreversible changed view of the United States because of this war. From our government to our people, there is a growing awareness that the U.S. market will be less reliable than before. Although full decoupling from the United States is unlikely in the end, further reducing dependence on the U.S. market is inevitable.

I think this will also be a consensus shared by most countries around the world; no country can fail to feel lingering fear after such a sudden tariff coercion. From ancient times to the present, no empire has endured forever, and the United States will be no exception. The myths of dollar hegemony and the U.S. Treasury as the anchor of stability may gradually be rewritten. This will not happen overnight, but the U.S. president has pressed the accelerator on the process.

The U.S. president has imposed the highest tariffs of any U.S. president in over 120 years. To date, there have been 21 days when the S&P index has moved by more than 1,000 points in a single session; four of those occurred during his term. He is truly different: he has, unprecedentedly, tried to challenge the entire world single-handedly, setting an unprecedented record.

The U.S. president can be said to owe his rise to social media and may also be undone by it. Among world leaders, he is the most adept at using social media to promote himself; an important criterion in selecting his partners is that they, too, be good at self-promotion on social media, with or without political experience considered secondary. In this age of social media, he has keenly grasped the pulse of the times and used social media to stage a comeback, winning a second term as U.S. president.

But as an ancient Chinese saying goes: one may win the empire on horseback, but one cannot govern it from horseback. The president clearly lacks this kind of political wisdom. Having been elected through social media, he governs through social media. The greatest drawback of governing through social media is that it undermines his credibility. Social media communication is fast, broad-reaching, and cheap, but these very advantages are also its flaws. A political leader who speaks casually on social media without careful deliberation is bound to say many impulsive things. Once impulsive words accumulate, they are sure to damage the credibility of the speaker and of the country he represents.

The ancient Chinese also had a saying: he who speaks much is bound to err. Another ancient maxim is: if a ruler is not discreet, he will lose his state. The U.S. president has made many excessive remarks on social media, generating a great deal of controversy in an attempt to achieve his ends. But these remarks have ultimately caused him to be devoured by the side effects of social media: others can equally use social media to interpret and spread unfavorable information about him, and he has been besieged there. The double-edged sword of social media has made him a laughingstock, greatly damaged the credibility of the U.S. government, and endangered the U.S. economy.

Like most ordinary people who want a quiet life, I do not want the world to fall apart. But if we want a more peaceful world, we must stand up in moments of crisis and make our voices heard, so that those who would disrupt our lives know what fear is.

Although each individual's voice is faint, the voices of countless individuals are enough to make those who disregard the suffering of others restrain their own behavior. The purpose of arms is to stop fighting; against those who bully others, the most persuasive argument is weapons of all kinds, not surrender. Only when those who would create panic are themselves frightened will the hands that create panic possibly stop.