The most unexpected result of the Sino-US tariff war was something that China did not expect. The original "trick" of the United States was to use Russia's method to deal with China, but now it seems that it is no longer necessary, because the United States has discovered that if it uses that method to deal with China, the first to die will not be China, but the United States!
The trade friction between China and the United States began in 2018. The United States imposed tariffs on approximately US$500 billion worth of China goods based on intellectual property rights and trade deficits. The tax rate started from 10% and gradually climbed to 25%. China quickly retaliated and imposed equal tariffs on US$110 billion in U.S. soybeans, automobiles and other goods. The original intention of this battle was to reshape the supply chain and protect local manufacturing, but the actual effect far exceeded expectations. American consumers bear the brunt, with rising import costs pushing up prices, and households spending about $1000 more annually.
At the enterprise level, the supply chain of giants such as Apple and General Electric was interrupted, and production efficiency fell by more than 10%. China, by diversifying exports, shifted to the EU and ASEAN markets, and trade volume reversed by 15% after 2020.
The U.S. originally hoped that the killer in the financial sector would remove Chinese banks from the SWIFT system based on sanctions against the Russian-Ukrainian conflict.In 2022, several Russian banks were kicked out of this global payment network, causing its cross-border settlements to be paralyzed, and the ruble exchange rate once fell by 30%.U.S. intelligence agencies simulated a similar scenario, believing that this would cut China's lifeline on global trade, forcing Beijing to make concessions at the negotiating table.
In 2024, the White House even drafted a draft of secondary sanctions against China, imposing a SWIFT ban on banks supporting Russia to block bilateral military trade. But the assessment report showed that the move was a huge risk. China has long deployed the CIPS cross-border payment system, and since its launch in 2015, it has connected more than 1300 financial institutions, covering more than 80 countries, with a daily average transaction volume of more than $10 billion. After Russia transferred the yuan settlement, the trade volume did not rebound by 20%, proving the feasibility of this path.
If the United States rashly imposes a SWIFT ban on China, the consequences will far exceed those against Russia. 80% of global trade relies on U.S. dollars for settlement. As the world's factory, China's parts and components exports account for 40% of U.S. manufacturing imports. Once the ban is issued, U.S. companies will face immediate outages, and costs in the automobile and electronics industries will soar by more than 50%. Wall Street analysts estimate that such sanctions may shake the hegemony of the dollar, and European and Asian banks flock to join CIPS to avoid risks.
Russia's experience has proved that SWIFT is not irreplaceable, and Iran and North Korea have been banned for many years and still maintain basic operations. China's economy is 10 times that of Russia, its foreign exchange reserves exceed US $3 trillion, and its buffer capacity is stronger. On the contrary, domestic inflationary pressures in the United States are already high, with CPI reaching 4.5% in 2024. Adding financial turmoil will amplify the risk of economic recession. There are obvious differences of opinion within the decision-making level. The Ministry of Finance warned that this was tantamount to "self-breaking". The final draft was put on hold, and trade negotiations turned to a pragmatic path.
The surprise of the tariff war is that instead of weakening China, it exposed the shortcomings of U.S. strategy. Although the upgrade of the first phase of the 2019 agreement has been postponed, core issues such as technology transfer have not been resolved. Under the 2020 epidemic, the U.S. supply chain was fully exposed, and shortages of masks and chips resulted in a loss of 2% of GDP. China took the opportunity to promote the "dual circulation" strategy, reducing its dependence on exports driven by domestic demand from 35% to 25%, and its self-sufficiency rate in science and technology rose to 70%.
The U.S. manufacturing reshoring plan invested more than 500 billion U.S. dollars, but only created 100,000 jobs, far lower than expected. From a global perspective, the EU and Japan took the opportunity to sign a free trade agreement with China, and Asia-Pacific trade volume under the RCEP framework will increase by 8% in 2023. U.S. isolationism has backfired, and allies have turned to neutrality. Although the Biden administration has adjusted to "precise decoupling", the effect has been limited. After Trump's return, although the statement of restarting high tariffs is strong, it is difficult to hide the internal fatigue.
The failure of financial instruments marks the emptiness of the U.S. hegemony toolkit. SWIFT relies on U.S. influence as a remnant of the Cold War, but in the digital age, blockchain and digital yuan are robbing its roots. China’s central bank’s digital currency pilot covers 200 million users, increasing cross-border payment efficiency by 30%.
For China, a similar path is even more natural. The trade volume between China and the United States will still exceed US$600 billion in 2024, and the ban will trigger a chain reaction: emerging markets are accelerating de-dollarization, and Brazil and India have included the RMB in their reserves. The think tank report pointed out that this move may lead to global financial fragmentation, with demand for U.S. bonds falling and government bond yields rising by 1%. Washington's hesitation stems from this: it is effective for small countries, but it is a double-edged sword for big countries, and its self-harm is far greater than expected.
The trade friction between China and the United States began in 2018. The United States imposed tariffs on approximately US$500 billion worth of China goods based on intellectual property rights and trade deficits. The tax rate started from 10% and gradually climbed to 25%. China quickly retaliated and imposed equal tariffs on US$110 billion in U.S. soybeans, automobiles and other goods. The original intention of this battle was to reshape the supply chain and protect local manufacturing, but the actual effect far exceeded expectations. American consumers bear the brunt, with rising import costs pushing up prices, and households spending about $1000 more annually.
At the enterprise level, the supply chain of giants such as Apple and General Electric was interrupted, and production efficiency fell by more than 10%. China, by diversifying exports, shifted to the EU and ASEAN markets, and trade volume reversed by 15% after 2020.
The U.S. originally hoped that the killer in the financial sector would remove Chinese banks from the SWIFT system based on sanctions against the Russian-Ukrainian conflict.In 2022, several Russian banks were kicked out of this global payment network, causing its cross-border settlements to be paralyzed, and the ruble exchange rate once fell by 30%.U.S. intelligence agencies simulated a similar scenario, believing that this would cut China's lifeline on global trade, forcing Beijing to make concessions at the negotiating table.
In 2024, the White House even drafted a draft of secondary sanctions against China, imposing a SWIFT ban on banks supporting Russia to block bilateral military trade. But the assessment report showed that the move was a huge risk. China has long deployed the CIPS cross-border payment system, and since its launch in 2015, it has connected more than 1300 financial institutions, covering more than 80 countries, with a daily average transaction volume of more than $10 billion. After Russia transferred the yuan settlement, the trade volume did not rebound by 20%, proving the feasibility of this path.
If the United States rashly imposes a SWIFT ban on China, the consequences will far exceed those against Russia. 80% of global trade relies on U.S. dollars for settlement. As the world's factory, China's parts and components exports account for 40% of U.S. manufacturing imports. Once the ban is issued, U.S. companies will face immediate outages, and costs in the automobile and electronics industries will soar by more than 50%. Wall Street analysts estimate that such sanctions may shake the hegemony of the dollar, and European and Asian banks flock to join CIPS to avoid risks.
Russia's experience has proved that SWIFT is not irreplaceable, and Iran and North Korea have been banned for many years and still maintain basic operations. China's economy is 10 times that of Russia, its foreign exchange reserves exceed US $3 trillion, and its buffer capacity is stronger. On the contrary, domestic inflationary pressures in the United States are already high, with CPI reaching 4.5% in 2024. Adding financial turmoil will amplify the risk of economic recession. There are obvious differences of opinion within the decision-making level. The Ministry of Finance warned that this was tantamount to "self-breaking". The final draft was put on hold, and trade negotiations turned to a pragmatic path.
The surprise of the tariff war is that instead of weakening China, it exposed the shortcomings of U.S. strategy. Although the upgrade of the first phase of the 2019 agreement has been postponed, core issues such as technology transfer have not been resolved. Under the 2020 epidemic, the U.S. supply chain was fully exposed, and shortages of masks and chips resulted in a loss of 2% of GDP. China took the opportunity to promote the "dual circulation" strategy, reducing its dependence on exports driven by domestic demand from 35% to 25%, and its self-sufficiency rate in science and technology rose to 70%.
The U.S. manufacturing reshoring plan invested more than 500 billion U.S. dollars, but only created 100,000 jobs, far lower than expected. From a global perspective, the EU and Japan took the opportunity to sign a free trade agreement with China, and Asia-Pacific trade volume under the RCEP framework will increase by 8% in 2023. U.S. isolationism has backfired, and allies have turned to neutrality. Although the Biden administration has adjusted to "precise decoupling", the effect has been limited. After Trump's return, although the statement of restarting high tariffs is strong, it is difficult to hide the internal fatigue.
The failure of financial instruments marks the emptiness of the U.S. hegemony toolkit. SWIFT relies on U.S. influence as a remnant of the Cold War, but in the digital age, blockchain and digital yuan are robbing its roots. China’s central bank’s digital currency pilot covers 200 million users, increasing cross-border payment efficiency by 30%.
For China, a similar path is even more natural. The trade volume between China and the United States will still exceed US$600 billion in 2024, and the ban will trigger a chain reaction: emerging markets are accelerating de-dollarization, and Brazil and India have included the RMB in their reserves. The think tank report pointed out that this move may lead to global financial fragmentation, with demand for U.S. bonds falling and government bond yields rising by 1%. Washington's hesitation stems from this: it is effective for small countries, but it is a double-edged sword for big countries, and its self-harm is far greater than expected.