Trump’s tariffs and protectionism may backfire as China surges ahead

With the world reeling under US President Donald Trump’s cowboy economic approach – unilateralism, championing tariff wars and driving American protectionism – wise words uttered by Ronald Reagan come to mind.

“Throughout the world, there is a growing realisation that the way to prosperity for all nations, is rejecting protectionist legislation – promoting fair and free competition. For those of us who lived through the Great Depression, the memory of the suffering it caused, is deep.

“At first, when someone says: ‘let us impose tariffs on some foreign imports’, it looks like you are doing a patriotic thing by protecting American products and jobs. For a short while it works, but only for a short while,” warned the former US president decades ago.

Trump’s approach, with SA-born billionaire Elon Musk’s hand visible, is like dangling a double-edged sword, set to backfire – ultimately hitting hard at the US economy.

This, as economists warn while the world is glued to the global impact of the Trump antics, China’s economy has grown to supersede the American economy.

For years, the narrative has been whether China will overtake the US economy as it loses its top economic position, power and influence.

Experts point to China’s grip on manufacturing, global trade, technology and military capability, while the US has moved away from production.

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They also point to China forging ahead with constructing the future at an unprecedented pace – producing anything from electronics to pharmaceuticals.

Currently, nearly 30% of global manufacturing output – the US and Europe combined – is from China.

In looking at the purchasing power parity, the US may have the title of being the largest economy in the world, but it is the Chinese economy which has proven to be larger – taking a lead in manufacturing and exports.

With the US economy relying on debt and financial services – rising inflation and some of its companies relocating overseas – America has spent decades outsourcing production.

Undoubtedly, all this has given China the edge to gain economic influence globally.

As Trump uses the White House to chastise visiting heads of state, Chinese President Xi Jinping has been wooing global business leaders.

Last month, more than 40 global chairs and CEOs of foreign businesses attended a meeting with Xi at the Great Hall of the People in Beijing.

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Xi noted the twin miracles of rapid economic growth and enduring social stability that China has created over the past seven decades since the founding of the People’s Republic – especially reform and opening up.

He underscored that growth in the Chinese economy was due to the strong leadership of the Communist Party of China, as well as the unity and hard work of the Chinese, including the contribution of foreign businesses operating in China.

China has introduced reforms and opened up its economy – actively leveraging foreign capital.

This has seen it rapidly enter the global market and catch up with the times in great strides.

According to Xi, foreign businesses and investment in China, have driven economic growth and employment, boosted technological and managerial progress, and facilitated reform and opening up.

In the process, foreign businesses have thrived and enjoyed handsome returns – and achieved win-win results.

Some lessons for Trump on how best to deal with the globe.

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