President Donald Trump has been called a bull in a china shop one million and six times — but what if it's China's shop he's aiming to break? He just might, too.
Recent history shows that, just like with any other government program, tariffs can produce mixed results at best. But I'm not here today to discuss the merits of tariffs broadly but rather their effect on our most worrisome strategic competitor, Communist China.
(For the record, I'm generally a fan of free trade — at least with friendly nations — but I'm no ideologue. )
I have to get a bit technical here, so bear with me.
Wellington-Altus Chief Market Strategist James Thorne argued on X last night about the bind Trump put China in. China, he wrote, is "weighed down by surplus production, overcapacity, and inelastic supply. A rapidly aging population and rising labor costs have left its growth model wobbling."
Economically, China has yet to recover the dynamic growth it enjoyed before Communist Party boss Xi Jinping's extended COVID lockdowns.
Thorne went on to ask, "What happens when millions from the countryside lose their jobs as factories slow and exports falter? Social unrest could erupt like a powder keg, while Beijing’s half-hearted reforms offer little relief."
Selling their horde of T-bills helps Beijing weaken the RMB while simultaneously thwarting Trump and SecTreas Scott Bessent's goal of bringing down interest rates. That much is working. We're just a few days into this and, after early drops, the yield on the 10-year is inching back up again. The thing to remember about war — even a trade war — is that the other guy gets to shoot back.
Beijing's goal is to keep its exports competitive even with an eye-popping 104% tariff while putting the hurt on us here at home until Trump blinks. But Thorne compared Trump to Dirty Harry, who "stares down China’s precarious economy and growls, 'Go ahead, make my day.' Devalue the RMB and sell [US Treasuries]."
But devaluing the RMB too far risks capital flight, as the Chinese do whatever they can to trade in their increasingly low-value RMB and park their savings overseas in safer currencies. Beijing has been trying (and failing) for years to stimulate economic growth, and capital flight would make a bad situation worse.
Looking at the bigger picture, Martin Capital founder Rod Martin noted on Tuesday that "Countries from Argentina to Vietnam are falling all over themselves to cut 'zero-zero' tariff deals with Trump," giving companies like Apple a not-so-gentle prod to accelerate moving their production out of China.
UPDATE: Trump's just-announced "pause" on increased tariffs on all countries but China is further evidence that his primary goal all along was isolating China from global markets to the greatest possible degree.
So China's dependence on the U.S. export market isn't its only choke point, and Trump is squeezing it hard.
That isn't to say we don't have choke points, too. Carol Roth, financial analyst and author of "You Will Own Nothing: Your War With a New Financial World Order and How to Fight Back," warned on X today that "Small businesses have been beaten up for 5 years — Covid, supply chain, labor disruption, inflation," and that "they cannot take another govt induced shock."
"Wall Street can manage through, Main Street will be crushed again," Roth concluded.
There's at least some anecdotal evidence to back that up. There are plenty of reports out there, and this one is just the most recent I found:
Fox News tells a story a small business owner who used to pay $26,000 in tariffs on goods imported from China, but now faces a $346,000 tariff due to Trump’s new 104% tariff on Chinese imports.
— Ron Smith (@Ronxyz00) April 9, 2025
"We think that China is gonna have to pay for it. A special needs toy importer-- when… pic.twitter.com/bcDBrlUggM
Those tariffs kicked in today, but many importers have their sales prices contractually locked in for the short term. Where is the money supposed to come from for a small business existing on slender margins? That's a tough question and one we don't yet have the answer to.
There are risks and pain involved in weaning ourselves off our dependence on China for vital finished goods, and I'm trying, once again, to be honest about them. The point to remember is that detox hurts, but it beats the hell out of continued addiction. And sometimes it takes somebody with a bull in a china shop attitude to help us kick.
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