China's Unblinking Stare
China’s unique political and economic structure gives it a clear advantage in the trade war. It can endure pain the U.S. cannot, making it the more patient and powerful player.
Introduction
The trade war between the U.S. and China is not a simple game. It is a conflict where one side has a much higher tolerance for pain. While the U.S. believes it can force a deal, China's economic and political structure gives it a clear advantage.1 Beijing is playing a long game, and Washington may be the first to break.2 This is a story of unequal leverage and different national wills.
The ongoing trade negotiations between the U.S. and China have dragged on, with deadlines extended and little progress made.3 President Trump's "Art of the Deal" has not worked with China, and for a simple reason: China is not like Canada or the EU. As Deputy Chief Economist Benjamin Tal points out, China has a greater capacity to withstand economic pain. It is a different kind of adversary, one that can absorb blows without public complaint, giving it a powerful edge in this standoff.
China's Resilience to Pain
China's political system allows it to endure the negative impacts of a trade war in a way that a democracy cannot. The Chinese government does not face the same electoral pressures as a U.S. administration. The pain from a weak economy, a direct result of these tariffs, can be felt by the Chinese people, but they are not allowed to complain. This lack of public accountability gives Beijing a crucial advantage. They can take a lot of punishment and simply not blink.
The U.S. Needs China More
The relationship between the two economies is not one-sided.4 The U.S. needs China as much as, or even more than, China needs the U.S. Tariffs on goods from China amount to a small percentage of U.S. GDP, but the true leverage lies in specific sectors. For example, over 90% of U.S. antibiotics and other pharmaceutical ingredients come from China. If Beijing were to cut off these shipments, the U.S. would face a major crisis. This is a powerful form of economic warfare, one that goes beyond tariffs and directly threatens the health and well-being of a nation.
The Power of Critical Minerals
Another key area of Chinese leverage is in critical minerals.5 These are the raw materials essential for everything from cell phones to military technology.6 The U.S. economy and its defense industry are heavily reliant on a steady supply of these minerals, and China is a dominant global producer. A disruption in this supply would stall out the U.S. economy. While the U.S. has domestic deposits, they are not being mined. This reliance on an adversary for foundational materials puts the U.S. in a vulnerable position. It is a simple fact that a country cannot be a superpower if it depends on another for its basic functions.
The Fiscal and Political Clock is Ticking for the U.S.
Time is not on the U.S.'s side in this standoff. The Trump administration needs a deal to show a win and to collect money from tariffs to pay for tax cuts. The tariffs are a significant source of revenue, but they also create economic uncertainty and can hurt U.S. businesses and consumers. With an election on the horizon, the pressure to secure a deal, any deal, is immense. This political timeline gives China an advantage. They can simply wait for the U.S. to feel the pressure and compromise.
Conclusion
The trade war with China is a difficult, drawn-out affair. What is at stake is not just trade numbers, but the fundamental economic and geopolitical balance between the two world powers. The U.S. entered this conflict with a belief in its own strength, but it failed to account for China's unique ability to withstand pain and its quiet, yet powerful, leverage. China can afford to wait. It can absorb the economic blows and endure the hardship. It holds cards the U.S. cannot match, not in tariffs, but in critical supply chains for everything from medicine to military hardware.7
The U.S. must understand that simple tariffs will not work against a country that does not have to answer to its people. A new approach is needed, one that recognizes the full scope of China's leverage. The U.S. must begin to address its reliance on foreign powers for essential goods. This means investing in domestic production of critical minerals and pharmaceuticals, a long and difficult path that must begin now. It is a matter of national security and economic independence. The moral of the story is plain: a nation cannot be truly strong if it relies on its rivals to survive.
Takeaways
China's political system allows it to endure the pain of a trade war more effectively than the democratic U.S.
The U.S. is heavily reliant on China for critical imports, including pharmaceuticals and rare earth minerals.
A disruption in the supply of critical minerals would severely damage the U.S. economy and defense industry.8
The U.S. has a political clock ticking, while China does not.
A deal is likely, but it will be a compromise that favors China.
Source
BNN Bloomberg | China not blinking in trade war with U.S.: Tal