Issue 26: Playing Ball

1 May 2025

Trump has underestimated China and overestimated the leverage of America’s US$300bn trade deficit with the country. China is now less dependent on the U.S. market than it was in 2016, and its economy is less reliant on exports overall. Meanwhile, the US corporates are more deeply embedded in global supply chains than Trump realised. If China is playing hard ball its to gain leverage. A spike in US consumer inflation and/or a sharp slowdown in US domestic demand is the leverage that will bring Beijing to the negotiation table. The clocking is ticking for both Trump and Xi. We have reached half time. The de-escalation phase has started, with both parties quietly easing tariffs for specific sectors.