For decades, the United States has dominated the global economy. It made the rules, built the world’s biggest corporations and controlled the world with blood, debt, technology and also bombs!! But now China is the new gangster in town!!! While the US built a propaganda machine to look down on China, China built a manufacturing empire so powerful that it is holding America by the throat!! While America once laughed at “Made in China”, China is now laughing at America with 19.4% of the world economy in its pocket!! So, what did Trump do? Donald Trump declared a war. A war Not with soldiers or tanks—but with the most powerful weapon of the 21st century which is Economics. And the world is calling this the Trade war of US and China!!! But you know what? While most people think, it an economic masterstroke, the wall street journal is calling tariff strategy the Dumbest trade War in history!! So the question is, What is this Trade war between the US and China? Will this bold move of Trump slow down China? Will it send the world economy crashing down? And most importantly, with China being at war with America, how will India benefit in this cross fire?
Why does Trump hate China ?
let’s start by understanding why does Trump hate China well Donald Trump has three strong reasons
1 reason why Trump hate china
Donald Trump thinks China is a thief and he’s not entirely wrong because during his tenure in 2018 America discovered something absolutely shocking about China. Everybody knows that semiconductors are the lifeblood of the world economy and a company called Micron Technology was a semiconductor Titan who had spent billions of dollars in decades of research into building the best semiconductors in the world they are Cutting Edge memory chips powered everything from Apple’s iPhone to NASA’s spacecrafts and the fun fact was that China was micron’s biggest customer accounting for 50% of its Revenue so business was booming and Micron was Unstoppable but then something terrifying happened to Micron in 2018 some Micron Engineers were cleaning the storage room and while cleaning they found a laptop that was left by a former employee who had just left Micron but when they opened the laptop they were shocked to see that the laptop contained the files of the secret blueprints of their most valuable chips it was the most spine chilling thing they had ever seen in their life so with no time to waste Micron activated an emergency response task force millions of dollars were immediately funneled every digital footprint was analyzed every communication was was traced and every possible lead was followed to find these engineers and finally what they uncovered was far worse than they imagined these group of Micron Engineers had stolen these designs and hand delivered them to a Taiwanese firm called fujin Juna and here’s the real shocker this company fujin Juna was backed by the Chinese government and just when you think it couldn’t get worse it does instead of facing the punishment or feeling guilty about it. China flipped the script they started gas lighting Micron you know what they did the Chinese courts banned Micron from selling in China and accused Micron of stealing their technology. This was so bad for micron that within some time Micron lost billions of dollars in value its stock plummeted and the company was locked out of its most profitable Market meanwhile China prepared to mass produce Micron stent technology without spending a dime on research and when this case was taken to court the Chinese vent free due to lack of evidence but China has done this to American companies again and again and again.
2 reason why Trump hate china
Donald Trump thinks that us and China are like to toxic people in a toxic situation-ship where the US keeps buying cars iPhone and semiconductors from China while China just keeps collecting cash and barely buys anything in return look at this in 2024 the US imported approximately $525 billion worth of goods from China and what did China Buy in return well China just bought $164 billion worth of American products and that’s it so that’s a 361 billion dollar trade Gap so every time Americans fill their carts with made in China Goods they’re essentially paying for jobs in China while the American manufacturers are going bankrupt and lastly Donald Trump believes that China is slowly strangling the United States in such a way that when the war comes China is capable of paralyzing the US Army and the best case to prove this was Huawei.
Did you know that in 2019, the US Department of Justice exposed a chilling truth Huawei had been stealing secrets from six American tech companies and they were not just stealing ideas they were stealing Source codes Blueprints and confidential manuals then in 2022 the FBI uncovered something even more scary huawei Telecom equipment were quietly installed near the US military bases and nuclear missile silos and these equipment had the capability to intercept and even disrupt highly classified defense department Communications in fact huawei was such a dangerous company that the United States ended up Banning Huawei altogether.
Donald Trump is waging an economic war against China?
Donald Trump is waging an economic war against China which the world is calling the trade war between us and China and here’s how it works out let’s take a real world example of an electric vehicle a Chinese made EV Like Neo costs around $30,000 to manufacture in China and it is sold in the US for 35 ,000 after shipping and dealer markups a similar american made EV like a Ford Mustang Maki costs around $40,000 to manufactured in the US and is sold for $45,000 in the market so without tariffs the Chinese car will cost $35,000 and the American car will cost $45,000 so clearly the Chinese car is $10,000 cheaper and most price conscious American consumers would prefer the Chinese car or the American car right this is the reason why American manufacturers go bankrupt and the Chinese end up fueling their economy with more exports and more jobs so what does Donald Trump do to protect the American automakers let’s say Donald Trump imposes a 25% tariff on Chinese cars now the Chinese car gets a hit with an extra 25% tax on its $335,000 selling price that adds $8,750 to the price TCH so now the new price of the Chinese car is $335,000 + $8,750 equal to $43,750 now the price gap between the American and the Chinese car shrinks dramatically Chinese car costs $43,750 and the American car cost $45,000 and now with only a $1,250 difference the American car makers have a much better chance to compete with Chinese inputs this helps keep American manufacturing alive and prevents China from flooding the US market with cheaper Vehicles this is how tariffs are supposed to work so this looks pretty great right Trump is out there flexing his economic muscle and he’s slapping Tariff on Chinese companies and making them pay so the Chinese will lose business and the Americans will win right wrong because like I said while most people think it is an economic Master stroke The Wall Street Journal is calling this strategy the dumbest trade war in history.
How did Trump use Tariff Strategy ?
When we did our analysis it did make sense so let’s break it down to understand how the Tariff strategy might actually fail look at this before Trump’s tariffs an American bought a Chinese made smartphone for $1,000 and now Trump decides to punish China and slaps a 10% tariff on Chinese electronics sounds great right China should be paying for this except they don’t instead the Chinese company just increases the price to $1,100 so now that same smartphone cost $1,100 and guess who pays this extra $100 it’s not some Uncle sitting in Beijing guys it’s Bob from Texas and Karen from New York who was standing at the store thinking why the hell is this phone costing $100 more and if you multiply this across millions of products from laptops to washing machines to car parts suddenly you will see that the Americans are selling out billions of dollars just to punish the Chinese so yes Americans are paying the money and they’re expecting that the Chinese will be punished and what is China doing nothing it is still selling the same stuff just at higher prices and here’s where you need to understand the might of the Chinese power you see guys firstly the American Products can’t replace the Chinese products overnight because the labor and resource cost of China is far lesser than the US look at this a Tesla Model 3 is 65% cheaper to be made in Shanghai than in the US secondly even made in America Products import Chinese raw materials to produce them in America so if China increases its taxes on raw materials automatically the American Products in America will get costlier and lastly even with additional taxes the American Products still can’t beat the Chinese products and in certain sectors China’s price Advantage is absolutely mind-blowing for example in Footwear and head wear Goods China was the lowest cost supplier for 59% of the products and in Metal Products this number stood at 54% so in short economists say that even if heavy tariffs are imposed on the Chinese products it will take money out from the Americans but it won’t punish the Chinese in fact according to Peterson’s Institute for international economics Trump’s tariffs will cost the average American household an additional $1,200 a year this is the reason why China has America by its throat and even the mighty superpower of the United States of America is not able to shake up China so if the Chinese products aren’t going anywhere who gets these extra $100 it’s the government of the United States of America so will the terce kill Chinese jobs or the American jobs well we don’t know yet because economists say that even if the American companies try to move back to the US for manufacturing it’ll be a nightmare for them for example if Apple made iPhone’s in the US instead of China the price could jump from $1,000 to $2,400 and why is that it is because of the labor cost us workers earn $24 per hour compared to just $3.6 in China similarly Key Parts like screens and cameras are still made in China which will add import costs if assembled in the US on top of that just like the Indian government even the US business regulations are too bad which could weaken manufacturing infrastructure and push the cost of the iPhone even higher.
Is is possible to move company out from china?
It impractical to move from China all the way to us secondly the Tariff could cause a job crisis you know president Trump loves to say that tariffs could create jobs but the economists argue at what cost because if you look at the 2018 case study of the washing machine tariffs after being imposed with 20% tariff washing machines made in China became very costly so companies like Samsung and LG they opened us factories and created 1,800 new jobs well it sounds great until you realize that those 1,800 jobs cost American consumers $1.5 billion a year in additional prices so Americans paid $800,000 per job created and here’s where it gets worse tariffs don’t just create jobs they also destroy them for example in 2018 Trump’s steel and aluminum tariffs were supposed to protect American manufacturers but you know what actually happened steel got more expensive car and Machinery manufacturers got crushed by the high cost of Steel and studies estimate that 75 ,000 manufacturing jobs were lost because of the rising prices so yes some jobs were created but more jobs were lost because of tariffs and lastly The Economist of America fear that when China responds by taxing back the US Goods in China it could cause a nightmare for American Industries look at this the last time this tariff War happened during the Trump tenure by 2019 China had levied 8 to 25% tariffs on most us Goods that it Imports and this move was so devastating that it began eroding the American agriculture Market if you know soybean is the single most valuable us export crop to China but after tariffs soybean saw the exports drop by almost 75% and not just soybean even pork and sorghum was so badly hit that in total the American agriculture Market lost $26 billion similarly China said American cars sell in America but their components go from China right so they raised their tariff on Chinese components in the US because of which American manufacturers faced higher costs and they again had to cut back on profits eventually they had to restrict expansion and even cut wages so now what remains to be seen is how will China respond in 2025 to the second round of Trump’s sanctions and while these Americans and Chinese are engaged in this tariff War the good thing is that for India this presents a wonderful opportunity because if Chinese products get more expensive Indian Goods should become more competitive in the US market so as American companies are moving away from China India is the next alternative right so will India become a superpower because of this trade War well unfortunately just like many other golden opportunities we are not even capable of utilizing this trillion dollar Economic Opportunity why because we have three major issues guys firstly we have the bureaucratic nightmare of setting up a business in India.
Alternative for Company to move from China?
While registering a company in Vietnam takes 6 months in India it could take up to 5 years in fact Elon Musk wanted to bring Tesla to India but India slapped 100% import duties and drowned them in policy RP now this is fine if they were luring Tesla to come to India but even after 5 years of negotiation nothing concrete has come out and it’s not just Tesla over 1,000 projects in Gujarat alone are stuck due to environmental clearances meanwhile Samsung set up an entire smartphone Factory in Vietnam in just one year with $22 billion in investment this is a first problem that we have which are sarkari babus and their procedures the second problem is the land acquisition issue did you know even when foreign investors want to set up factories in India it is very difficult to get a piece of land in India look at this in 2005 a South Korean steel giant named posco announced a 12 billion investment in Odisha which could have been India’s biggest foreign investment ever but after 10 years of legal battle over land PASCO walked away in 2017.
Thirdly we have a skill Gap look at this only 2% of India’s Workforce is formally skilled whereas in South Korea it’s 96% in Japan it’s 80% in China it’s 40% and even in Vietnam it is 12% this is what the skill India initiative was supposed to fix but even after years of efforts only 5% of India’s Workforce has formal training so even in Industries where India could dominate like automobile manufacturing textiles in electronics we simply don’t have enough trained workers to capitalize on this opportunity and while China and South Korea invest heavily into AI Automation and R&D India is still struggling to train her people for basic manufacturing so even though this is a big opportunity for India India unfortunately is too slow too bureaucratic and too unprepared to to capitalize on it we have become better in the past 10 years but not good enough so Vietnam is winning Mexico is winning and even Bangladesh is winning so until India fixes its business climate simplifies regulation and closes its skill Gap the dream of becoming China’s replacement will always remain a distant dream.
This is what completes our analysis of Donald ‘s tariff strategy now you tell me in the comments what are the lessons that India is supposed to learn from this trade war and how can we capitalize on this opportunity.