Trump, Tariffs, Geoeconomics and Geopolitics

What does Trump want? Power is back, red in tooth and claw. When US presidents meet with President-for-Life Xi Jinping there is something telling in the respective body languages of the leaders. Unlike in the past it is the American who wants something. They both see themselves as Masters of the Universe, President Trump because he cannot help himself, President Xi because he is, at least the Chinese universe. The more President Trump tries to emulate President Xi, by governing through Executive Order and ignoring both Congress and the Supreme Court, he simply cannot.  President Xi, the unelected victor of a thousand Party power struggles, is self-promotingly, self-assured precisely because he is not bound by such constraints.

 

Why the tariffs? What is self-evident is that the world is back in the old-new age of bipolar competition, but what kind of competition?  This past week has seen geopolitics and geoeconomics merge.  Geoeconomics has been the essence of the tariff wars Trump has unleashed on the world, but geoeconomics is merely the harbinger of geopolitics and the struggle for supremacy across the broad canvas of power both soft and hard. The epicentre of this struggle will be the Pacific but it will also affect the world.

 

The facts speak for themselves. Deluded Western fans of globalisation (often economists) have overseen the greatest transfer of wealth and power from the US and the wider West to China since a similar transfer from Britain to the US in the first part of the twentieth century. Today, the US, the Apex Market and once THE creditor nation has a national debt of some $36.8 trillion or around 122% of GDP and a budget deficit of $2 trillion.  China also has a national debt of $9.9 trillion, which is some 110% of GDP, and a budget deficit of some $570 billion. Beijing is trying to cut its budget deficit caused partly by bailing out major companies caught up in a disastrous property asset bubble.

 

Whilst the figures may seem roughly comparable the key figure of comparison is the annual budget deficit. By holding large amounts of US dollars in the Chinese Central Bank and continually breaking World Trade Organisation rules on tariffs and by imposing tariffs which effectively prevent access to China’s internal market Beijing has gained an unfair advantage.  It also explains why China’s budget deficit is only 25% of that of the US. The most obvious beneficiary of this highly successful Chinese strategy to exploit Western consumerism is the growth in Beijing’s military capability which the West has effectively paid for. In 2025 alone, Beijing increased the defence budget by 7.2%. This means China now has effective and comparable defence budget of $411 billion compared with the US defence budget in 2025 of 883.7 billion.  

 

Moreover, whilst the US economy remains significantly bigger than China’s nominally with a 2024 GDP of around $28.8 trillion compared to $18.5 trillion, if power purchasing parity is used as a yardstick the figures change markedly. ‘PPP’ compares productivity and standard of living. According to the IMF in 2025 China has a economy worth $39.44 trillion compared with a US economy worth some $30.34 trillion.  The figures do not mean China is richer per capita than the US because its population is 4 times greater, but it does demonstrate the rate of growth in relative Chinese state wealth and power. For example, in 2000 the nominal GDP of the US was $10.2 trillion whilst that of China was $1.2. Even using PPP China’s economy was only some 30% that of the US.       

 

Beijing clearly understands the relationship between geoeconomic and geopolitics. In March 2025, China warned the US on X that it was ready to “fight any type of war” with the US. Under instructions from Beijing the Chinese Embassy in the US even went as far as saying, "If war is what the US wants, be it a tariff war, a trade war or any other type of war, we're ready to fight till the end."   This was before Trump’s April 2025 decision to slap 67% tariffs of Chinese imports to the US, and China’s response.  China’s point was clear: the battlefield in this phoney war may be tariffs but as far as Beijing is concerned it is already at war with the US not just over Taiwan but Beijing’s determination to impose its ‘rules’ about power and wealth on the world and Trump’s determination to prevent it. In other words, the struggle is systemic and dangerous.

 

As J.K. Galbraith once said, “Power is as power does”.

 

Julian Lindley-French