China's Tariff Strategy and the One-Punch Proverb

An old Chinese proverb contains the key to understanding their tariff strategy: 打得一拳开 免得百拳来

"throw out one punch now to avoid a hundred punches in the future"

What does it mean? By striking hard all at once, you can avoid the pain and tedium of striking many times later.

When President Trump placed a pause on the Liberation Day tariffs, the entire world breathed a sigh of relief. He promised that the tariffs would go into effect only on countries who had retaliated, which at this point was only China. China responded by escalating its tariffs to 84%.

China is the only country refusing to back down from Trump's threats. This will devastate both economies. Last year, China imported $143.5 billion of goods per year from the U.S., and the U.S. imported $438.9 billion of goods from China. So why is China doing this?

Trump's tariff policy has been, to put it mildly, volatile. Nobody is really sure what he will do next, and whether he will stick to his promises. By forcing the issue and escalating now, China is forcing Trump to deal with the economic reality of the tariffs.

And unlike China, the U.S. is a democracy, where the leaders must listen to the citizens, who are loudly responding to the tariffs. Although the stock market has rallied in response to the 90-day pause, if the proposed 125% tariffs actually go into effect on China, we can expect to see further dips in the market as businesses are crushed by expenses.

If China had backed down, we might have seen months and months of additional uncertainty around tariffs, with Trump pulling them in and out based on his whims. But with the pain that is sure to come now, Trump will have to face facts about the consequences of his policies, and hopefully reconsider his beliefs.

What do you think? Is China's policy the right way to go?

(Special thanks to Ke Ren for teaching me this proverb, which has gone viral on Chinese social media)