President Donald Trump has long argued that foreign countries place tariffs, quotas and restrictions on U.S.-made goods or engage in unfair trade practices that harm our economy. For Trump, his strategy is simple — force nations to renegotiate their trade policies or be willing to place their economies at risk.
Trade disputes are the mutual infliction of economic damage. They are often a battle of attrition, determined by each nation’s ability and willingness, to outlast the other. The biggest factor is economic leverage — using the size and strength of your economy to both impose and absorb economic punishment. This punishment usually comes in the form of tariffs. As the world’s largest economic powerhouse, America’s economy is an imposing presence. For most nations, to engage the U.S. in a trade dispute provides for dire options. Either capitulate, and negotiate more U.S.-friendly trade agreements, or face the wrath of punishing tariffs that could severely damage your economy.
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Mark M. Grywacheski
For perspective, Canada’s economy is about 7% the size of America’s economy. Mexico’s economy is even smaller at about 6%. Neither have the ability to either impose or absorb a lot of punishment in any extended trade dispute with the U.S. Even the 27-member nation European Union, whose collective economies are roughly 50% the size of America’s, is starting to show cracks within its unity.
At the heart of Trump’s global trade disputes is China. Trump views China as the biggest violator of unfair trade practices. China heavily subsidizes its steel and aluminum industries. This allows Chinese manufacturers to flood the global marketplace with cheap steel and aluminum at prices with which U.S. manufacturers cannot compete. Trump has also accused China of violating international treaties by intentionally devaluing its currency, the Chinese yuan. By artificially lowering its currency relative to other global currencies, China inherently makes its goods cheaper to buy, which harms America’s manufacturing industry.
But the ultimate prize for Trump is his demand for unconditional access to the Chinese marketplace. Besides having the world’s second largest economy, China is also the world’s second most populous country, behind only India. With a population of 1.4 billion — more than four times greater than America’s — China equates to a massive consumer pool for American goods and services.
But unfettered access to China’s consumers remains out of reach. In 2024, according to the U.S. Department of Commerce, America’s trade deficit with China was $295.4 billion, our largest deficit with any single nation. For every $1 in goods China buys from the U.S., we buy $4 in goods from China.
American companies also complain that to operate in China, they are required to turn over their intellectual property — such as patents and technology — to the Chinese government. Through its practice of forced technology transfers, China’s state-owned corporations then use these assets to compete against those very same U.S. companies. In other cases, American intellectual property is obtained by outright theft. Combined, China’s theft, espionage and forced technology transfers are estimated to cost U.S. corporations between $225-600 billion annually, according to the Center for Strategic and International Studies.
Yes, Trump has proven he is quick to use the U.S. economy as a sledgehammer to influence the trade and geopolitical policies of other countries. But China could be a daunting task. China’s economy has the size, and potential durability, to withstand a longer trade dispute than most other countries.
Perhaps the biggest X-factor is that China is a Communist country. Unlike Canada, Mexico, the European Union and other democratic nations whose leaders are subject to political pressures and reelection, in China, there are simply no elections. Its nation, along with its economy, is dictated by the Communist Party. And the party leadership can simply mandate its citizens will continue to endure a brutalizing economy rather than concede to Trump.
