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By Bolaji Ojo
What’s at stake:
Even if Donald Trump were to cancel all the tariffs he has imposed on nations exporting goods to America today, the effects of his actions will remain for years to come. Trust and faith in the American system, including in America’s commitment to “allies” and paying of its debts, have been shaken and it will be difficult for people to forget how jarring this last one week has been on international commerce. The impact of the 2025 Tariff Wars will be felt for years to come. In electronics and high tech, it will impact management and manufacturing decisions.
Aside from threats of mortal danger, 丢脸 (diū liǎn, or loss of honor, respect and social status or infliction of extreme embarrassment) is probably the worst insult you can inflict upon a Chinese individual.
The Chinese see 丢脸 as a wound so deep and devastating that it can only be reversed by inflicting a similar or a higher level of pain on the opponent. If it cannot be reversed, however, death would be considered a redemption.
To fully understand what is happening in the tit-for-tat of economic relations between China and the United States today, observers and analysts should remember and reflect upon the following phrase: loss of face. In China, it’s worse than death. In the Western world, at worst, it’s a call to leave a dangerous situation and return to fight another day.
Electronics OEMS and the global supply chain should keep this in mind as they try to find solutions to the challenges their enterprises face as a result of the nightmarish trade war that has broken out between the United States and its trading partners. On Wednesday, China increased tariffs on American exports to 84 percent, hours after Donald Trump slapped 104 percent tariff on goods manufactured in China for sale in the US.
China’s response to America’s action was swift, which should not have surprised anyone. The reaction was expected as it is still early innings in the economic battle America has launched to reset the country’s economic position in the global market.
What happens next is uncertain. Donald Trump had on Monday asked China to by Tuesday cancel the 34 percent tariff it slapped on American goods in response to the imposition of a similar rate on Chinese products. Trump proceeded with his threat to raise duties on Chinese goods to 104 percent if China paid no heeds to his request. The 104 percent rates went into effect early on Wednesday, spurring China’s response.
Will America raise tariffs on China even higher or will cooler heads prevail? This is the question uppermost on everyone’s minds as US equity markets opened for trading on Wednesday. As at the time of writing this report, the American government had not responded to China’s action.
No off ramp?
The tariff war will have implications for the global electronics market, especially as it has become clear that industry executives and associations have limited leverage with the American government. Most of the tariffs imposed have been conducted without the input of industry bodies. While associations like the Semiconductor Industry Association (SIA) have commented or advocated in the past on developments such as the Chips Act, they have been largely silent in this case.
The last statement issued by the SIA on Trump’s economic actions were issued before the administration announced the recent tariffs. In February, SIA president and CEO John Neuffer encouraged the government to be careful in its use of tariffs because “if not approached carefully, tariffs could make it significantly more expensive to develop and produce Made-in-America semiconductors and the many critical technologies they enable, including artificial intelligence.”
The situation may have gotten out of hands now that an active tariff war has broken out. The US and China appear to be digging in their heels, preferring verbal slugging to a negotiated solution. And, yet, unless both parties are determined to completely derail the current global economic system, they will have to find ways to hold discussions on their objectives.
Any discussions may not happen immediately because neither party is ready to yield an inch to the other, according to observers. From the American government’s side, the objectives go beyond simply getting China to cut tariffs on sales of US goods in the country. The United States wants to sharply reduce imports and increase the percentage of goods made in America. Even if China backs down and eliminates tariffs completely on American goods and services, the communist country cannot unilaterally force its local manufacturers and foreign ones to transfer production to the US.
Since increasing local production is a fundamental US objective, and because it has focused on the use of tariffs to achieve this goal, America may not back down. The situation is worse for China’s government. If it caves in to US demand, the Communist Party will face the wrath and disdain of its citizens. The embarrassment, or loss of “face” and respect, could threaten its legitimacy.
After the fever pitch tariffs battles finish playing out, the two parties will eventually resolve their differences behind closed walls, each pronouncing victory on whatever they agree upon. This is what we see as the likely outcome.
Bottom line:
Neither China nor the United States appear ready to back down from their bruising tariff war. Now that they are approaching a stalemate, however, the two may initiate backroom discussions to resolve their differences. That’s what many in the electronics industry hope will happen. When this will occur, though, and the terms of an agreement, remain uncertainty.
Related articles:
Where Are We Headed with China?
China Isn’t for Everyone, Maybe Not Even Nvidia
China ‘War Games’ Threaten Fragile Electronics Ecosystem
Bolaji Ojo is publisher and managing editor of the Ojo-Yoshida Report. He can be reached at [email protected].
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