Fundamentally, the extreme tariffs on China are the exact same mistake as the sanctions on Russia and will have the same principal effect: to prove in the eyes of the world the impotence of the United States.

Which is pretty ironic when you think about it as in many ways one of Trump's key tasks in his mandate was to handle the US's defeat in Ukraine in a way that restores the US's image of strength; which he evidently wanted to do by throwing Europe under the bus and let them (and Ukraine) bear the costs and consequences of the defeat.

You'd think that would impress upon him the lesson of not making the same mistake again, yet here we are: he hasn't even negotiated an end to the Ukraine war yet he's already applying much the same script against China, an economic giant compared to Russia—the very embodiment of Einstein's proverbial definition of insanity.

And this time, unlike what happened with Russia, the US has far less legitimacy to do so and is completely and utterly alone in this endeavour: Europe won't be there to pass the buck to when things predictably go south.

Because that's without an inch of a doubt what will happen. I keep hearing this argument that China is much more dependent on the United States than the contrary; that when you're the surplus country you somehow have less leverage in a trade war than the deficit country.

This, I'm afraid, is the same type of magical and hubristic thinking we used to hear in 2022 when the West kept saying it would destroy the Russian economy.

For one China actually has very little dependence on exports to the US. They make up the equivalent of less than 3% of its GDP, and the immense majority of these aren't Chinese products but American products made in China: iPhones, Dell computers, Nike shoes, etc.

If you take an iPhone for instance, less than 2% of its costs go to Chinese workers making the phone, and all in all Apple makes an estimated 58.5% gross margin on its phones. So, who's more hurt when you disrupt that supply chain: China or the United States? It's exports from China to the US, sure, but it's the US that captures the most value here. And it's therefore first and foremost US value that's being destroyed when you disrupt this trading relationship.

Don't take my word for it, just look at the latest economic forecasts. Goldman Sachs yesterday estimated that the new tariffs would cost China 0.5% of its GDP *growth* this year, with the economy still growing at 4%. Meanwhile the same Goldman Sachs sees 45% chance of a US recession this year following the tariffs, with a GDP growth forecast of 0.5% for the year. Previously, before this tariff madness, they were predicting "another solid year" of economic growth for the US at 2.5% GDP growth.

In other words, Goldman Sachs—which can't exactly be characterized as being biased in favour of "communist China"—believe that tariffs will cost China 0.5% of its GDP and the US 2% of its GDP: the US will be hit 4 times harder!

This is mostly because, as we'll undoubtedly discover in the coming weeks if this madness persists, the US is much more dependent on China than the contrary.

It's not only end products like iPhones or Nike shoes that'll suffer but the entire US supply chain: Trump keeps saying that imports are bad, that the US needs to become autarkic and make everything at home, but according to the US National Association of Manufacturers an incredible 56% of goods imported to the US are actually manufacturing inputs, with a lot of that coming from China.

How on earth can the US develop manufacturing at home, if that is indeed the objective here, while cutting itself from manufacturing inputs? Anyone with an ounce of common sense can see that the logic is absurd.

All in all, history will likely record this moment as yet another key event in America's downfall when—blinded by the same hubris that characterized its Russian sanctions strategy—it deliberately undermined its own economic advantages.

Compounding the damage, other nations watching this self-inflicted wound as well as Trump's egoistic and crass "America first, come kiss my ass" rhetoric, will likely accelerate their own efforts to reduce economic exposure to the United States.

It's almost like a Greek tragedy about the inevitability of fate: despite all warnings and omens, the protagonist remains convinced of his exceptional destiny, only to discover too late that his desperate attempts to maintain dominance were themselves the prophesied instruments of his undoing.

 

Arnaud Bertrand is an entrepreneur and China analyst. Can be found on X @RnaudBertrand. Bertrand founded HouseTrip, a leading European vacation rental marketplace, and is founder and CEO of Me & Qi, a premier English-language platforms for Traditional Chinese Medicine. He is also a graduate and honoury professor of Founder & CEO of Me & Qi, one of the premier English-language platforms for Traditional Chinese Medicine. He is also a graduate and honorary professor of Ecole Hôtelière de Lausanne in Switzerland.