David Woo: Trump's China Policy is a 'War of Attrition', Not a Trade War

Escalation Beyond a Trade War

• 💥 The current US-China economic conflict is described as much more than a trade war, escalating into a "war of attrition".
• 🎯 The impulse from "China hawks" in the administration is to obliterate the Chinese economy, aiming to protect US hegemony.
• 📉 The actions taken, such as a 145% tariff, are characterized as "economic murder" rather than trade policy.

The DeepSeek News and Shifting Strategies

• 💡 The DeepSeek News event is highlighted as a game-changer, proving AI can be easily copied and rendering previous US sanctions on semiconductors less effective.
• 🚀 This event created a new sense of urgency among China hawks to act decisively against China's technological advancement.
• 📈 The shift in strategy moved from targeting China's technological access to aiming for economic bankruptcy.

Trump's Dealmaking vs. China Hawks

• 🤝 While Trump is seen as a dealmaker who prefers win-win scenarios, the China hawks have gained control, pushing for more extreme measures.
• ⚠️ Trump's initial approach to China might have been more measured, but subsequent events and advisors have maneuvered him into a position where backing down is increasingly difficult.
• 🇺🇸 The administration's actions are seen as a response to a perceived existential threat from China, making it politically difficult to de-escalate.

Economic Impact and Future Outlook

• 🛒 Americans have not yet felt the full impact of the tariffs, with inventory buffers currently masking the inflationary effects.
• 📈 The "war of attrition" is expected to inflict significant pain on both US and Chinese economies, with potential for recession in the US.
• 🚫 The path to de-escalation is unclear, as high tariffs make a simple "peace deal" difficult, and a "game of chicken" analogy is deemed irrelevant; it's now a prolonged conflict.

Geopolitical and Domestic Pressures

• 🇷🇺 Trump's perceived weakness on Russia and Iran may be pushing him to appear tougher on China to satisfy China hawks within his administration.
• 🗣️ Domestic political considerations, including the perception of China as an existential threat, make it challenging for Trump to negotiate a significant de-escalation.
• 📉 The lack of clear policy assumptions and potential miscalculations by the administration suggest a difficult road ahead, with markets expected to continue declining in the near term.