President Trump has upped the ante in the US-China trade war.

This week the US president announced new tariffs on $200 billion worth of Chinese goods, scheduled to come into effect in September. They will be added to the $34 billion worth of duties that came into effect on July 6. This first wave of tariffs was met with an equal response from the Chinese side, which slapped counter-tariffs on US goods like soybeans and bourbon. However, it will be impossible to reciprocate in-kind on the new September tariffs given that China only imports around $150 billion worth of US goods. This will force the Chinese authorities to get creative in their attempts to ramp up the political and economic costs of President Trump’s trade war.

Will the combined weight of Beijing’s response be enough to force President Trump to blink? The answer is increasingly looking like a resounding ‘no.’

Impact

We are drifting past the point of no return in a US-China trade war; both sides are locked into their roles, and neither will be willing to back down since both believe themselves to be the aggrieved party. For President Trump, this is a reckoning that’s decades in the making. He believes himself to be the first president who has been brave enough to tackle structural imbalances in the bilateral trade relationship head-on. For the Chinese authorities who have long since gotten used to the status quo, this is an unnecessary fight that President Trump has quite obviously started.