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I'm Stephen Caroll, and this is Here's Why, where we take one new story and explain it in just a few minutes with our experts here at Bloomberg. What a difference a few weeks can make. This was on the tenth of April.
Well, we'll see what happens with China. They've really taken advantage of our country for a long period of time. They've grouped us off. How people stood for it, sitting in my position is not even believable.
Fast forward just over a month to the twelfth of May.
We achieved a total resehit with China after productive talks in Geneva. Both sides now agreed to reduce the tariffs imposed. The relationship is very, very good. I'll speak to President she may be. At the end of the week.
After weeks of escalation, the United States and China agreed to a ninety day truce, slashing tariffs on each other's goods that had spiraled to over one hundred percent. The Chinese president has struck a defiant tone ever since Trump began raising US tariffs to their highest level in a century. In contrast to other world leaders. Cheatingping has refused Trump's repeated calls to get on the phone with him, and speaking the day after the deal was announced, he wasn't toning down his message.
There are no winners in tariff wars or trade wars. Bullying or hegeminism only leads to self isolation.
So here's why China's trade war strategy is working. Bloomberg opinion columnist Karorishima of Aswani joins me. Now for more, Karishma, how would you characterize the approach that Cheatingping has taken to Donald Trump since his return to the White House.
I think it's been tough. I think it's been unflinching. I think we've seen a lot of nationalists rhetoric out of both governments, but in particular from China. When the trade tariffs were first announced, we saw sort of tit for tat action from Beijing in a way that at the time most political analysts and economic analysts had sort of said, oh, that won't happen, because China can't afford the economic hit of consistently trying to match the tariffs
on the American side. Instead of a sort of more conciliatory approach, we did see a very firm stance from Sijenping and Chinese officials, and I think that's paid off because I think what that's shown the Americans is that the Chinese were not going to back down and were not going to come to the negotiating table just because there had been tariffs slapped on them by the US.
When things were escalating rapidly. In April, you quite presciently wrote that the Chinese president wouldn't blink first in the trade war.
What led you to that conclusion.
I think that China in some respects has as much, if not more, to lose when it comes to political legitimacy and credibility with its own people. Both leaders are
playing to their domestic audiences, right. So in China, on the one hand, you have a political system where the Chinese Communist Party doesn't need to win elections like the Republicans do, so even with economic pain that was foreshadowed as a result of the trade tariffs, they could galvanize and mobilize their people and citizens there and sort of consistently hammer on that narrative that the US is trying to keep China down. It's a really effective narrative. And
it's been used before. But I think the other reason why I felt at the time that the Chinese wouldn't blink first is because they see this as part of a sort of historical arc, which is that it's China's moment to rise while the West is in decline. And that's something we've heard consistently from Chinese officials time and time again, not just with regards to the trade war, but other aspects of the geopolitical squabble between the two sides, and I think had they backed down first, it would
have been counter productive to that narrative. We've seen measures on the Chinese side to address prolonged economic issues in a way to sort of prepare for the impact of the trade war. I'm not saying that there aren't real issues at play here, but I think that China is more willing to sort of suffer the long term economic costs in order to achieve political goals.
But does that approach, Krishma have limits?
Is there a place where the risks of the Chinese economy could be too great if this strategy is pursued long term?
Well?
Indeed, and I think the outcome of the weekend's discussions will be seen as productive on both sides, and it's something that the Chinese definitely wanted as well. And the fact that it happened in sort of neutral place they could save face. You know, they're not going to the United States in any way. Now you also have comments
from US officials saying we don't necessarily wanted decoupling. That's a huge win for the Chinese because that's something they've kept saying from the start and throughout this entire trade war during the Trump administration, this one and the previous Trump administration when you know, arguably all of these tensions first began. The Chinese have consistently said that they are the champions and upholders of the multilateral rules based order.
And given the.
Fact that you know, Trump imposed these tariffs not just on the Chinese, but on other countries as well, that's
a really easy argument to believe in. I mean, I've spoken to lots of Asian diplomats, you know, in the past couple of weeks, and there's a real degree of bewilderment, Stephen about why the Trump administration would go after all countries and not necessarily just target China the way that we have seen in the Biden administration, so Beijing has been able to win and score rather i should say, political points with its neighbors as well, not just trying to create that narrative back at home.
Should we expect a shift in tone because neither the US nor China have are particularly nice about each other over the past couple of weeks and months. But now that we're into a further negotiation phase, when this pause is in place, should we expect the tone of those comments to change.
I think you will see some of that. A lot depends on what happens in the next ninety days. You know, there is some speculation that these charps will just keep getting postponed, and that allows the Trump administration to say they're consistently talking and trying to get to some type of deal or negotiation. But you know, tariffs are higher than they were when before Trump became president, so that
is something that will definitely have an impact. I think going forward as well, there are going to be key issues that you will see as part of the negotiations become fact is in whether this deal unravels or not. One of the things I'm quite focused on in the next couple of days is the fentanyl agreement or you know what that actually means, because there are still tariffs attached to the negotiations on fentanyl tariffs side that I
think the Chinese would like to see removed. But you know, Beijing consistently says that it is not to blame for the US drug epidemic, that it's done as much as it can, and it feels that the US needs to
address this problem at home on the American side. They see this as another way that the Chinese sort of using what they have in terms of, you know, not clamping down on Chinese chemical companies that are using back door ways to get into the US via Mexico and selling drugs that they believe are killing, which are killing thousands of Americans. So that's one thing I think that will become a key focus going forward in the trade talks.
Are there lessons to be learned from for other countries on how to handle Donald try from the way that China has approached this.
Could anyone else pull this off?
Not in Asia? And nobody has the might and scale of the Chinese economy. Nobody has the ability to politically or economically withstand these tariffs. The way that the Chinese do, and I think you've already seen that with the flurry of meetings and politicians wanting to meet with Donald Trump and negotiate in some way these trade negotiations, and from India to Japan to South Korea, all of these countries have to some extent been lining up to try and get a better deal. And I think that is the
harsh reality of geopolitics and the way economies work. The Chinese can do this, but not anybody else.
Okay, Korashimavaswani, Bloomberg Opinion columnist, Thank you very much for joining us, and you can read Karashima's latest work at Bloomberg dot com slash opinion. For more explanations like this from our team of three thousand journalists and analysts around the world, go to Bloomberg dot com slash explainers.
I'm Stephen Carol. This is here's why. I'll be back next week with more. Thanks for listening.