Trade War Backfires on Trump - China Stronger Than He Ever Imagined

Well it’s official! Donald Trump is accelerating the collapse of the U.S. economy and dragging America’s global standing down with it. Meanwhile China’s President is traveling around the world securing new trade deals with the fast growing economies in the world and preparing his country for this intense next chapter in the US China relations.

Tariffs are Trump’s weapon of choice against China, but the on-again, off-again nature of these tariffs has created complete policy whiplash—confusing governments, rattling international markets, and making it nearly impossible to predict what’s coming next. Even on this channel, it’s been a challenge to bring you consistent updates as the goalposts shift every other day. But one thing hasn’t changed—no matter how this ends, China is going to win this trade war.

Unlike the chaos in Washington, Beijing is moving with discipline. After being caught off guard during Trump’s first administration, China has spent years planning ten steps ahead. Every time the U.S. makes a move, China hits back with a calculated counter strike—knowing exactly where to apply pressure. And now it’s becoming painfully obvious: the Trump administration had no plan, no foresight, and not even an understanding of how tariffs actually work.

Trump keeps repeating that tariffs will make other countries “pay back the U.S.” when in reality, the cost is being eaten by American businesses—and passed straight to you, the consumer. In today’s newsletter, we’re breaking down:

• The current state of Trump’s trade war

• Exposing the damage it’s doing to the American economy

• Showing why China is walking away with the win. Let’s jump into it!

One of the biggest delusions driving this trade war is the Trump administration’s completely inflated view of the American economy and more specifically, the American consumer. If you listen to top officials, they’ll tell you with a straight face that China has “no choice” but to cut a deal. Trump’s team wants you to believe Beijing is desperate for access to the U.S. consumer market and as a result, America holds all the cards. This is what happens when a country starts believing its own propaganda. Take it straight from the mouth of billionaire Secretary of Commerce Howard Lutnick:

Lutnick and Washington are stuck in the 1990s. They think the U.S. is the unchallenged center of the global economy and that everyone else is just trying to sell into it. But this outdated American exceptionalism has become a massive strategic blind spot. While the U.S. consumer base is still significant, the days of it being the global engine are long gone.

The real growth is happening elsewhere–and China is now the top trading partner to a majority of the world’s countries. A far cry from the US dominated world map some 25 years ago.

And that shift matters. While the U.S. is stuck fantasizing about a golden era that no longer exists, China has spent the past decade building a real economic future. From Latin America to Africa to Southeast Asia, Beijing has been investing, trading, and forming relationships. Meanwhile, Americans are drowning under inflation, watching their rent skyrocket and their grocery bills pile up.

This is not a country of consumers with spare cash for new high-tech Chinese products as 60% of Americans are just trying to survive paycheck to paycheck.

So when U.S. officials claim that China “needs” access to the American market, they’re completely detached from reality. Not only are they overestimating the American market, they are highly underestimating the Chinese market at the same time. Contrary to the outdated stereotypes, China’s economy is no longer dependent on exports.

As this graph from the Global Economy illustrates, exports now make up just 19.7% of China’s GDP—a far cry from the 36% peak in 2006 showing a rapidly decreasing reliance on exported goods, and an increase in power from the domestic consumer.

To put that in perspective, the average percentage of a country's GDP coming from exports is over 45%. That means that China at 19.75% is actually much less reliant on exports than most countries. China has become its own best customer with 80% of China’s economic activity now coming from domestic consumption.

And while American officials still picture China as a sweatshop churning out cheap goods for Walmart shelves, that version of China has moved elsewhere years ago. Their number one export destination hasn’t been the U.S. for almost a decade.

The number one partner since 2016 is the ASEAN bloc where trade has been steadily rising. At the same time, the percentage of Chinese exports to the US have fallen from 19% in 2018 to under 15% in 2024.

Beijing planned for this shift. Washington didn’t. Meanwhile, the rest of the world is starting to wise up. Countries that once played along with American leadership are now openly pushing back. Even some of Washington’s closest allies are calling out the bullying.

That's a Japanese government representative going as far as comparing the U.S. to a mafia-style extortionist. And it’s not just talk. Japan and South Korea have signed new trilateral trade agreements with China in direct response to Trump’s tariffs. Overcoming long standing strained relations. While Vietnam, another country with a historically tense relationship with Beijing, welcomed Xi Jinping for a high-profile visit to strengthen economic ties. Washington is being isolated—and the world is rearranging itself.

I mean you know things are crazy in US China relations when the Chinese embassy in Washington DC is sharing videos of Ronald Reagan to help Americans remember why tariffs never work

Trump is now being forced to back down. He’s granted wide-ranging exemptions for Chinese products, especially tech like iPhones and computers. This is after industry leaders and CEOs like Tim Cook reportedly begged him to reverse course. Threatening to Trump and Secretary Lutnick that iPhones alone would cost thousands if not 10s of thousands more dollars if they were produced in the US. The U.S. simply doesn’t have the capacity to rebuild those supply chains anytime soon.

In response to these exemptions Beijing still hasn’t lifted its tariffs. In fact, they’ve escalated—slapping export bans on heavy rare earths, which are critical to U.S. defense manufacturing.

But what happens next? Donald Trump launched this trade war believing he had the upper hand. But America’s legacy media companies can’t hide the truth anymore with the Wall Street Journal writing: China called Trump’s bluff and seems to have won this round.

All this chaos with trade policy flipping back and forth has done exactly what you’d expect—it’s thrown the entire global market into disarray. There is now so much uncertainty, businesses can’t plan more than a few months ahead, let alone make the kind of long-term investments that manufacturing requires. China is the factory of the world. If you’re doing almost any kind of business today, odds are your supply chain runs through China at some point. But these tariffs have smashed that foundation. Family-run businesses all the way to massive multinational corporations are now caught between rising costs and no visibility into what happens next.

And so, here we are—caught in the crosshairs of one man’s ego and a trade war he doesn’t even understand. Donald Trump promised to make America great again, but what he’s delivered is chaos: skyrocketing prices, broken alliances, and an economic strategy so erratic it’s chasing away investors, alienating partners, and driving the U.S. economy straight off a cliff. All while China plays it cool, patient, and strategic—picking up influence, winning trade partnerships, and locking in its position as the backbone of the global economy.

What we’re watching isn’t just a policy failure. It’s the systematic unraveling of American credibility on the world stage. A president who promised strength has exposed weakness. A trade war meant to cripple China is instead speeding up the decline of the U.S. dollar, the collapse of American soft power, and a global pivot toward a new economic center of gravity in the East. And the worst part? This didn’t have to happen. The U.S. wasn’t outmatched—it was outplayed. By a country that studied its opponent, made its moves deliberately, and refused to blink. So while Trump waits by the phone for a call from Xi Jinping that may never come, the rest of the world is already moving on.