“Everybody wants to make a deal and if they don’t want to make a deal, we’ll make the deal for them. We’re the one that really sets the deal, and that’s what we’ll be doing.”
– President Donald Trump, April 17, 2025
How’s that for instilling confidence? If you don’t make a deal with us, we’ll make a deal for you. Wasn’t that deal supposed to have been arranged when tariffs were imposed on some 180 countries on April 2, what the White House dubbed “Liberation Day?” It got kiboshed by a 90-day reprieve because investors got “yippy,” as the President put it. So, it looks like the S&P 500 is really the final arbiter of what happens here because despite all Mr. Trump’s bravado, it was a slide in the stock market that seemed to give him cold feet.
We keep hearing that at least 70 global leaders have lined up for trade deals, but nobody knows what may be in those deals. Or whether this is all for show – for example, all the cable networks were fixated on Italian Prime Minister Giorgia Meloni and Mr. Trump practically embracing each other in the Oval Office – except the reality is that she has no power to negotiate on behalf of the EU. But I am sure every trading floor across North America last Thursday stopped whatever they were doing to see if a deal was about to be announced. The markets have become obsessed with headlines and press conferences, and I don’t think there is anything in the CFA program that teaches investors how to navigate portfolios through this sort of craziness.
Mr. Trump is telling everyone that he is fully expecting Chinese President Xi Jinping to pick up the phone to make a deal, but that is not likely going to happen. Mr. Xi instead has ghosted Donald Trump and opted to go on a Southeast Asia junket to rally support against the United States. So far, only the most obtuse political observer would say that the U.S. strategy for dealing with China is doing anything more than backfiring.
There seems to be a general lack of appreciation that China has: (i) for the past decade prepared for a showdown, (ii) a President who is authoritarian and supernationalistic, (iii) greatly reduced its reliance on exports to the United States, (iv) a culture that does not believe tit-for-tat tariffs are the way leaders do business or negotiate settlements and (v) deemed “chi ku” – which translates to “eating bitterness” or more prosaically, enduring hardship– to be a virtue.
I tell this to people here in North America and they simply don’t believe it. They do so at their peril. Don’t allow these people, who have no understanding of the Chinese psyche, to manage your money. Of all the economic relationships in the world, nothing matters more than the one between the U.S. and China. Yet, it is now spinning out of control, likely to be resolved only if Mr. Trump picks up the phone and makes the call.
Here is one example of how China has long been preparing for this new chapter in the economic war with the United States: in 2017, 22 per cent of the goods imported into the United States came from China; that share has been brought down to 13 per cent, largely by the Chinese rerouting their exports through a third country before they reach the United States. Good luck to the administration trying to reverse this situation.
Moreover, China has options of its own. This is not the China of a decade or two ago whose economic model was mostly based on exports to America – in fact, the value of direct Chinese exports to the United States in 2024 was about the same as it was in 2013. Meanwhile, the value of China’s exports to the EU over that time frame soared. And there is this added point: China is now far less dependent on trade in general given the share of exports in China’s GDP has dwindled to less than 20 per cent, way down from 36 per cent nearly two decades ago.
Back in mid-February, China imposed a 15-per-cent tariff on LNG shipments (and coal), and since that time, it has ceased buying liquefied natural gas from the United States altogether – a clear sign that Beijing is furthering its strategy of decoupling itself from the U.S. economy. Less than five years ago, LNG shipments from the U.S. to China ran at 9.3 million tons, and are now down to zero (which is why Texans are freaking out right now). All long-term commitments for future supply out of the U.S. have been iced, with Beijing now diverting its purchases to gas producers in the Middle East and Asia-Pacific countries.
There now appears the prospect that a US$600-billion bilateral U.S.-China trading relationship is set to vanish, with one country hit with a tariff rate of 145 per cent rate and the other, 125 per cent. Every day or so it seems there are other negative actions such as China cancelling Boeing deliveries and the United States capping Nvidia shipments; China restricting sales of its vast chest of critical minerals and the United States now applying levies on Chinese vessels that dock at American ports. Mr. Xi is in Southeast Asia trying to pry its satellites away from the United States while the White House is playing the same game with its Western allies (or former allies).
In the various chat lines that I participate in, I am sensing a dangerous notion in the thinking of many of my American friends, namely that China will ultimately be brought to its knees. As much as I would love for that to happen, it likely won’t. Donald Trump is waiting for Xi Jinping to call, and I doubt that is going to happen. It is a colossal mistake to underestimate China.
Despite how most of the West feels about China being a menace today in many respects (and for good reason), the reality is that it has been a flourishing economic and cultural centre since the earliest stages of world civilization. Most in the West do not really understand the history of China, including its traditions, imperial dynasties and capacity for pain and shared sacrifice.
We must also realize that Xi Jinping is going to outlast Donald Trump in a political sense. So, we can expect Beijing to play the long, patient game. And Mr. Xi will not be running to the White House to make any deal even if the economy suffers for it over the next three-and-a-half years of Mr. Trump’s term in office. There will be a new U.S. president, but Mr. Xi will still be in power.
In any event, there is no doubt that China comes out a relative economic loser given what is happening. But there are wide swaths of the U.S. economy that are going to be feeling a whole lot of pain themselves. China is a critical and expanding market for liquefied natural gas exports, particularly from Texas (energy accounts for 39 per cent of Texas’s exports to China). Soybean farmers will also end up paying a price. In all, five states are at risk of losing a major customer for what they produce. In addition to Texas, the states of California (fruit, medical instruments and machinery), Washington (aircraft and produce), Louisiana (energy) and North Carolina (pharmaceuticals and building materials).
From a national security standpoint, and this is where “bean counting” does not matter in terms of the lopsided export-import data, the fact that China has hit back on rare earths is a vitally important matter because the U.S. is highly reliant on the imports of critical minerals including gallium, germanium, bismuth, antimony, graphite, tantalum and other materials with military applications (China not only mines most of the world’s rare earths, it is home to most of the world’s capacity for refining them).
Consider that there are 50 minerals in total that the U.S. government deems “critical.” This file is completely played but hugely important because American communication networks, energy production and military applications very much depend on China’s extraction and processing of these materials. For example, every F-35 fighter jet contains around 900 pounds of rare earth materials, and various submarines require more than 9,200 pounds.
No wonder Greenland and Canada have been on the President’s radar screen, because although America is a global leader in so many areas, it lacks domestic reserves of many critical minerals. This is where Canada does indeed hold some important “cards” in any future U.S. negotiations, assuming Trump’s “51st state” taunt was no more than a playful joke.
David Rosenberg is founder of Rosenberg Research.