The tariff war has begun to scramble, what is the final outcome predicted?

Purely from an economic perspective:

1. Among China’s three economic drivers, exports are the only profitable one. Investment efficiency is extremely low—almost equivalent to debt—and there’s no money for consumption. The result of a tariff war would be that exports are essentially banned, and already-struggling investment and consumption would be dragged down further. Coastal exports are expected to collapse, forcing a wave of foreign trade practitioners to seek reemployment. Simply put, China has no way to defend its exports, and U.S. tariffs hit precisely this weak spot. Since exports can’t be defended, it seems the only option is to give up on defending exports and retaliate with tariffs on U.S. goods.

2. Considering the worst-case scenario—zero trade after mutual tariffs:

   • China’s tariffs on the U.S.: In 2024, U.S. global exports were $3.19 trillion, with $143.5 billion going to China, accounting for 4.5%. Even if tariffs were applied to all of it, the maximum impact would be a 5% reduction in U.S. exports.

   • U.S. tariffs on China: China’s exports to the U.S. account for 15% of its total exports, while exports to Southeast Asia account for 16%. Considering the factor of re-export trade, the U.S. could potentially cut up to 31% of China’s exports.

3. Economic growth formula:
   GDP growth = Export × A + Investment × B + Consumption × C, where A + B + C = 1.
   Since investment and consumption are negligible, we simplify:
   GDP growth = Export growth.

   Also, investment and consumption rely on the conversion of export income. So the degree of damage to exports can be used to estimate the damage to GDP. China’s exports are heavily concentrated in coastal regions. The Yangtze River Delta accounts for 38% of total exports, and the Pearl River Delta for 20%. Evenly estimating, the U.S. tariffs could cut 18% of exports from both deltas, with the remaining 13% absorbed by other regions.

   While that figure may not seem huge, note that these two deltas represent 24% and 11% of national GDP respectively—35% combined. A total export reduction of 18% in these areas could result in a 6% hit to GDP. Assuming all GDP growth comes from exports, and the annual growth target is 5%, we’d lose at least 1%. Furthermore, if investment and consumption also rely on exports, the total economic loss could be around 6%.

   Losing 1% growth equates to millions of jobs. A 6% loss in total output spells disaster for the economies of both deltas. Once the deltas fall, regions dependent on fiscal transfers from them won’t fare well either.

   If we expand the scope nationwide—assuming only exports are profitable, and investment and consumption rely on export revenues—the maximum GDP loss could reach 31%, making economic survival extremely difficult. This echoes what Lin Manhong wrote in Silver Thread, where reduced silver inflows from Latin America brought the Qing Dynasty to the brink of collapse. In this analogy, silver is equivalent to U.S. dollars.

4. As mentioned earlier, if you can’t defend, don’t bother—just hit back with tariffs. This turns into a consumption battle. In the U.S., it’s the consumers who bear the cost. The U.S. strategy should involve two moves:

   • First, ease pressure on consumers by reducing tariffs on other countries.

   • Second, impose heavy tariffs on China, aiming to eliminate both direct and re-export trade routes.

   Midnight update: Trump has announced a 90-day pause on tariff hikes—except for China—and will raise tariffs on Chinese goods to 125%. As I predicted yesterday, this move aims to fully ban Chinese exports and re-exports.

   Trump’s easing of tariffs with 75 countries helps buffer U.S. consumers, making the tariff regime more sustainable. But targeting China alone means even if bilateral trade drops to zero, the U.S. only loses 5% of its exports, which can be redistributed to other markets. That gives Trump flexibility to raise tariffs on China as high as he wants.

   This is no longer a chaotic trade war—it’s a one-on-one tariff war.

5. In the end, it’s a pure war of attrition—who can endure longer, American consumers or Chinese producers and consumers?