'The Trump administration believes that it has the upper hand in this fight. "We export one-fifth to them of what they export to us," Treasury Secretary Scott Bessent recently remarked, "so that is a losing hand for them." That view has things backwards. The fact that the American economy is hooked on Chinese goods is a massive weakness for the U.S., not an advantage. For many categories of goods, China is not only America's top supplier but also the world's dominant supplier, meaning that the U.S. can't simply get them from other countries. According to data gathered by Jason Miller, a professor at Michigan State University who specializes in supply-chain management, China produces more than 70 percent of the world's lithium-ion batteries, air conditioners, and cookware; more than 80 percent of the world's smartphones, kitchen appliances, and toys; and about 90 percent of the world's solar panels and processed rare earth minerals, the latter of which are crucial inputs to cars, phones, and several key military technologies.
Pivoting to producing these goods at home would take years, if not decades: It would involve forming new companies, building new factories, creating supply chains from scratch, and training fleets of workers. For it to happen at all, companies would have to be confident that the tariffs would be in place for the long term. China, meanwhile, is only heavily dependent on the U.S. for a small fraction of its imports, and most of those items, such as soybeans and sorghum, can be imported from elsewhere.
Chinese businesses will be hurt by losing access to the American market, but that is an easier problem to solve. China can redirect some of its exports to countries in Europe and East Asia, whose citizens also need phones, toys, and toasters. Beijing could also give money to its own citizens to create more demand for its products at home and provide subsidies to its businesses to help them remain solvent. This asymmetry gives China what the economist Adam Posen calls "escalation dominance": the ability to inflict disproportionate harm on its economic enemy.'
Pivoting to producing these goods at home would take years, if not decades: It would involve forming new companies, building new factories, creating supply chains from scratch, and training fleets of workers. For it to happen at all, companies would have to be confident that the tariffs would be in place for the long term. China, meanwhile, is only heavily dependent on the U.S. for a small fraction of its imports, and most of those items, such as soybeans and sorghum, can be imported from elsewhere.
Chinese businesses will be hurt by losing access to the American market, but that is an easier problem to solve. China can redirect some of its exports to countries in Europe and East Asia, whose citizens also need phones, toys, and toasters. Beijing could also give money to its own citizens to create more demand for its products at home and provide subsidies to its businesses to help them remain solvent. This asymmetry gives China what the economist Adam Posen calls "escalation dominance": the ability to inflict disproportionate harm on its economic enemy.'
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