US-China Trade War 90-Day Pause: What Happens Next? | When Titans Clash

US-China Trade War: A 90-Day Pause and the Bigger Picture

Key Concepts: US-China trade war, tariffs, nationalism, technological competition, AI, Global South, economic policy, green technology, international diplomacy, "100 years of humiliation," R&D, manufacturing, supply chain, skilled labor, green transition, Global South, multilateralism, reputational damage.

I. The 90-Day Truce: A US Blink?

• The Pause: A 90-day truce was declared in the US-China trade war, involving a rollback of tariffs. The US reduced tariffs on Chinese imports from 145% to 30%, while China lowered duties on US imports from 125% to 10%.
• China's Position: China didn't pledge much in the agreement, with no structural changes in the US-China relationship, increased market access for US firms, or public concessions.
• US Pressure: The US was pressured to negotiate due to the threat of empty shelves, higher inflation, and economic disruption.
• China's Upper Hand: China successfully achieved a rollback of tariffs in exchange for agreeing to talk, giving them the upper hand.
• Continued Tough Posture: Experts believe China will continue to take a tough position in future trade talks.
• Xi's Philosophy: President Xi's essay in Qiushi emphasized that "striving for security through struggle brings genuine security, while seeking security through weakness and concession ultimately leads to insecurity."

II. China's Assertive Stance: Nationalism and Tech Prowess

• Economic Challenges: China faces economic troubles, including a property sector downturn, local government debt, youth unemployment, and stock market issues.
• Political Dimension: China cannot be seen backing down under pressure from the US due to historical context ("100 years of humiliation").
• Nationalist Sentiment: There's a stronger feeling of self-assurance and self-confidence in China, leading to a more assertive stance.
• Tech Superpower: China believes it is a tech superpower, with more Chinese papers published in leading scientific journals and more patent applications than the US.
• Techno-Nationalism: President Xi pledged policy support for AI companies, reflecting a strong sense of techno-nationalism.
• Rally-Around-the-Flag Effect: People are buying local and supporting China's champions in the context of US-China competition.
• DeepSeek Example: China can make AI just as well as Western models and at a cheaper price, with plans to export it globally.
• Genuine Innovation: Chinese companies are emerging in sectors like AI, renewable technology, and electric vehicles, posing challenges to Western firms.
• Supply Chain Caveat: China is still reliant on the West for upstream components of the semiconductor supply chain (chip manufacturing equipment and semiconductor design software).

III. US Policy and its Impact

• Outdated Views: Some in the US policy community hold outdated views of China, believing Chinese innovation is solely based on intellectual property theft.
• China's R&D: Multinational corporations are in China for R&D and innovation.
• Robotics Industry: China holds over 190,000 valid patents related to robotics (two-thirds of the global total). Companies like KUKA (acquired) and SIASUN are competitive.
• Cost Reduction: China has excelled at driving down the cost of industrial robots.
• Humanoid Robots: China is innovating in humanoid robots powered by AI, capable of performing intricate tasks. Examples include Unitree Robotics' G1 robot and the Zhejiang Humanoid Robot Innovation Center's Navigator 2.
• Drone Technology: China uses drones for various applications, including delivering blood, harvesting fruits, and planting trees.
• Huawei's Revenue Surge: Huawei's revenue surged, and it developed new AI chips to compete with NVIDIA.
• Nationalism's Impact on Negotiations: Nationalism in China makes finding a resolution to the trade war more difficult.
• Systemic Conflicts: The specific points of friction between the US and China are the result of underlying systemic conflicts, making superficial quick fixes inevitable.
• Trump's Unpredictability: President Trump believes unpredictability is his greatest asset, making the 90-day truce potentially unstable.
• War on Universities: The Trump administration is targeting universities, potentially hurting the US's long-term dominance in critical technologies.
• STEM Experts Leaving US: STEM experts are leaving the US for China due to increased investment in R&D and higher education.
• China's R&D Expenditures: China's R&D expenditures hit 3.61 trillion yuan in 2024, an 8.3% year-on-year increase.
• State Subsidies: Start-ups can tap on state subsidies to commercialize research findings.
• Manufacturing Dominance: China dominates global manufacturing, accounting for over 30% of global manufacturing output.
• US Manufacturing Revival: The US wants to bring manufacturing back through tariffs, but this requires multi-billion dollar investments and a skilled workforce.
• TSMC Example: TSMC's factory in Arizona has faced delays, highlighting the challenges of bringing manufacturing back to the US.
• Infrastructure Issues: The US has dilapidated infrastructure, hindering manufacturing capabilities.
• Coal Revival: The Trump administration plans to revive the coal industry, rolling back environmental regulations.
• Green Energy Exports: China is powering ahead in its green energy exports, with companies like Huawei and Xiaomi entering the EV space.
• Solar Industry: China installed a record 217 gigawatts of solar panels in 2023.
• Green Tech's Contribution: Clean energy contributed a record 10% of China's GDP in 2024.
• Price Competition: Intense price competition among Chinese EV and solar companies could limit growth.

IV. Global South and International Diplomacy

• Global South Focus: China's Foreign Minister emphasized the importance of the Global South.
• Liberation Day Tariffs: Trump announced Liberation Day, slapping high tariffs on many Global South countries.
• Law of the Jungle: Trump's policies are taking the world back to a "law of the jungle" environment.
• Xi's Southeast Asia Trip: President Xi visited Vietnam, Malaysia, and Cambodia, signing cooperation agreements and promoting multilateralism.
• ASEAN Concerns: The US's use of tariffs to throw a wedge into the economic development of ASEAN member states will cause bad will.
• BRICS Meeting: The Trump trade war dominated discussions at a BRICS meeting.
• Reputational Damage to US: The Trump administration has damaged the US's reputation as a beacon of democratic ideals.
• China's Capitalization: China is trying to capitalize on the US's recklessness and position itself as a leader.
• Consternation Over Trump's Re-election: There's consternation in Asia and Europe over Trump's re-election, highlighting fissures in the American political landscape.
• Latin America and Caribbean: President Xi hosted leaders from Latin America and the Caribbean countries in Beijing.
• Pressure to Reduce Links with China: The Trump administration is asking some countries to reduce their links with China in exchange for tariff exemptions.
• "Don't Make Us Choose": Countries don't want to choose sides between the US and China.
• Walking the Talk: Countries need to demonstrate how they're not going to be caught up in great power competition.

V. Conclusion

The US-China trade war is in a temporary truce, but underlying systemic conflicts remain. China's assertive stance, driven by nationalism and technological advancements, poses a significant challenge to the US. While the US attempts to revive manufacturing and address infrastructure issues, China is investing heavily in green technology and expanding its influence in the Global South. The future of the US-China relationship remains uncertain, with potential for renewed tensions and a reshaping of the global order. The impact on smaller nations and the global economy will depend on how these superpowers navigate their complex rivalry.