Xi holds more cards than Trump in trade showdown

Tom Cruise is probably used to being caught in the crossfire of United States v China power plays. His 2022 blockbuster Top Gun Maverick never made it past Chinese censors. Now, his forthcoming film Mission: Impossible – The Final Reckoning may be on the chopping block too.

While the world waited for Beijing’s latest riposte in the tariff war, which came late on Friday, it took a swipe at Hollywood. Its film association announced it would immediately reduce the number of American films it imports, already limited to 10 a year, to “respect the audience’s choices”.

Xi Jinping and Donald Trump are showing no signs of backing down in the escalating trade war between the nations. Credit:

One doesn’t have to lace up Beijing’s shoes to imagine that a juiced-up tribute to American espionage prowess will be at the top of the blacklist. Trade wars don’t make for good movie plots, but they do have disastrous consequences.

With Chinese President Xi Jinping and his US counterpart, Donald Trump, standing eyeball to eyeball as global markets whipsaw around them, who will blink?

The current tariff scorecard is this: a 145 per cent US levy on Chinese goods and, in the other direction, a 125 per cent duty on American products.

At this point, US-China bilateral trade has already been curb-stomped, and any further tit-for-tat exchange will be more bravado than bite.

Where they go next will largely be determined by which side can withstand the brutal economic attrition the longest.

At Shanghai’s normally bustling port, US-bound containers are sitting idly on the docks, according to respected Chinese financial newspaper Caixin.

Since Trump’s first trade war with Beijing in 2018, China’s exports to America have dropped from 19 to 15 per cent. Nonetheless, a whopping $US439 billion ($708 billion) of Chinese-made goods landed in the US last year, a great slab of this being electronics.

American consumers are in for a shock when they go to buy their next iPhone. About 73 per cent of all smartphones, 78 per cent of laptops and 87 per cent of video-game consoles come from China.

The impact on Chinese exporters will be brutal, too, as they scramble to find new markets. Chinese leaders face the real possibility of “millions of people becoming unemployed” in a wave of bankruptcy, China expert Victor Shih told CNN, at a time when the country’s economy is already floundering.

It is now a question of when – not if – Beijing will unveil a new stimulus package to fire up confidence and get Chinese consumers spending so they can absorb some of the demand lost to the US export market. Top officials reportedly held ad-hoc meetings this week to thrash out a plan to boost the economy through support measures for housing and consumer spending.

Many analysts have late April pencilled into their calendars as a key opportunity for various state organs to rubber-stamp a strategy, coinciding with meetings of the Politburo and national legislature’s standing committee.

Demand for the $US144 billion of US imports in China will also dry up. A 125 per cent tariff will deliver a sucker punch to Trump’s rust-belt base. American farmers send most of their soybeans and cotton to China.

As the Trump team begins negotiations with a dozen countries after pausing tariffs for 90 days, Beijing has embarked on a charm offensive to recruit its trading partners to a unified block of resistance against America’s coercion.

Xi will spend next week touring South-East Asia, holding bilateral meetings with Cambodia, Vietnam and Malaysia, which are facing crippling duties of between 24 and 49 per cent unless they secure a deal with Trump.

Beijing’s overtures to Australia – delivered via Chinese ambassador Xiao Qian’s appeal for the two countries to “join hands” – landed flat.

“We are not going to be holding hands with China in respect of any contest that is going on in the world,” Deputy Prime Minister Richard Marles said.

Ultimately, Xi holds cards that Trump does not. He has the full resources of the autocratic system he leads – a compliant media, a heavily censored internet and a sophisticated apparatus of state supervision to crush dissent – and no immediate political rivals.

American economist Adam S. Posen, head of the Peterson Institute for International Economics, argues that Trump has made a major misstep in escalating a tariff war before the US has reduced its dependence on Chinese goods that cannot be easily replaced or manufactured on home soil.

“Washington, not Beijing, is betting all-in on a losing hand,” he says.

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