3,291 words, 17 minutes read time
Trump had a spat with Canada and Mexico, then turned around and slapped China. Then he had a fight with the EU and slapped China again.
What they were talking about was essentially this: At the beginning of February, Trump announced tariffs on Canada, Mexico, and China. However, after Canada and Mexico compromised, he suspended the tariffs on them two days later, while the tariffs on China remained in effect. The situation with Europe was similar. Trump had just sent Vance to berate the EU, and then he turned around and slapped a 10% tariff on China.
Just as some people were gloating, they were caught off guard when the slap landed on themselves.
On February 27, Trump announced that the tariffs on Mexico and Canada, which had been suspended, would take effect as scheduled on March 4. The day before, Trump had just announced plans to set EU tariff rates at 25%, applicable to cars and various other goods.
Clearly, when Trump goes crazy, he doesn’t discriminate—whether it’s his own dog or his allies, he’ll slap them all.
Thus, the global tariff war that Trump unleashed after taking office officially began.
Part One
Let’s first explain what happened.
On February 1, 2025, just 10 days after taking office, Trump couldn’t wait to announce a 10% tariff on China and a 25% tariff on Canada and Mexico, citing the need to prevent drugs, particularly fentanyl, from entering the U.S.
All three countries announced retaliatory measures. However, only China took serious action, rolling out a series of measures within two days, including tariffs, export controls on key metals, an antitrust investigation into Google, and an unreliable entity list. It was clear that China had prepared its response in advance.
Unexpectedly, Canada and Mexico only held out for two days before giving in.
On February 3, Mexican President Claudia Sheinbaum called Trump, promising to immediately deploy 10,000 National Guard troops to prevent drugs, especially fentanyl, from flowing into the U.S. from Mexico. On the same day, Canada also pledged to invest heavily in border security, establishing a “Canada-U.S. Joint Task Force to combat organized crime, fentanyl, and money laundering.” Trump then announced a one-month suspension of tariffs on Mexico and Canada.
Honestly, there was a lot of discussion online at the time. Many people questioned whether China’s tough response was too hasty, suggesting that if China had negotiated with the U.S. about fentanyl, the tariffs might have been suspended.
However, just over 20 days later, Trump announced that drugs, primarily fentanyl, were still flowing into the U.S. from Canada and Mexico, and he claimed that these drugs were “manufactured and supplied by China.” He stated, “We cannot allow this scourge to continue harming the U.S., so the proposed tariffs scheduled to take effect on March 4 will proceed as planned.” Additionally, he imposed another 10% tariff on China.
From February 3 to March 3, exactly one month had passed.
Clearly, whether it was China’s tough response or Canada and Mexico’s surrender, the tariffs were inevitable.
Given that, why not fight back?
On March 4, China, having already implemented a round of countermeasures, decided to impose a 15% tariff on U.S. chicken, wheat, corn, and cotton, and a 10% tariff on sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy products.
Looking at Canada and Mexico, who were slow to retaliate, it’s clear they don’t understand the principle of “If we’re going to die anyway, why not die for a cause?”
What about the EU? It’s much the same.
Eight days before the U.S. election, Trump complained in an interview with conservative podcast host Hugh Hewitt, “The EU doesn’t buy our cars, and doesn’t buy our agricultural products. It hardly buys anything, while we buy everything from them—millions of cars, tons of food and agricultural products.”
Trump even said, “The EU is a mini—but not so mini—mini China.”
This attitude toward the EU was clearly a signal that tariffs were coming.
Sure enough, on the evening of February 2, Trump said he would “soon” impose tariffs on EU exports to the U.S.
Europe did try to resist. In February, both Polish President Andrzej Duda and French President Emmanuel Macron flew to the U.S. to meet with Trump.
But as soon as Macron left, the hammer fell. On February 26, Trump announced at a White House cabinet meeting that because the U.S. trade deficit with the EU was $312 billion, he would impose a 25% tariff on EU imports, covering key areas like cars and agricultural products, and said he would “soon” release the details.
Trump also angrily said, “The Europeans formed the EU with the purpose of bringing down the U.S. And they’ve done a great job! A great job!”
The Europeans? On one hand, they refuted Trump’s deficit claims, saying the U.S. has profited greatly from investments in Europe and that the EU has “always been a blessing to the U.S.” On the other hand, they announced that the EU was ready to use its “strongest trade weapon” against the U.S.
What’s the “strongest trade weapon”?
The Anti-Coercion Instrument Act.
This act, introduced in 2023, is a new legal tool for the EU to protect its economic interests and autonomy against economic coercion by third countries.
According to this act, if an EU member state faces “threats, intimidation, discrimination, or retaliation,” and the EU determines that “coercion has occurred,” it can initiate countermeasures, including tariffs, import/export restrictions, public procurement restrictions, foreign direct investment restrictions, trade-related intellectual property restrictions, and financial service restrictions.
Ironically, who was this Anti-Coercion Instrument Act originally designed to target?
China.
Remember when Lithuania set up a “pseudo-Taiwan representative office,” and China imposed a series of countermeasures on Lithuania? Yes, this act was introduced under U.S. influence to support Lithuania and counter China.
But who would have thought that just over a year later, before it could be used on China, the U.S. would be the one to face it.
Part Two
How to evaluate this round of tariff wars? Let’s briefly discuss a few points.
First, Trump’s reasons for imposing tariffs are nonsense. Don’t bother arguing with him.
For example, Trump’s excuse for imposing tariffs on China is the fentanyl issue, claiming that the fentanyl flowing into the U.S. is manufactured in China.
Honestly, most Chinese people don’t even know what fentanyl is. It’s a legitimate opioid drug, similar to morphine or pethidine, used for pain relief.
However, because fentanyl is cheap to synthesize and highly effective, it’s popular among American addicts, who either get it prescribed in large quantities or buy it on the black market from Mexican cartels. This has led to a fentanyl abuse crisis.
According to the U.S. CDC, Americans, who make up only 5% of the world’s population, consume 80% of the world’s opioids. Of the deaths caused by opioids, 70% involve fentanyl.
So, instead of reflecting on its own prescription drug management system, the U.S. has made China a scapegoat, claiming that the fentanyl in the U.S. is synthesized from Chinese raw materials!
This makes no sense! China produces ordinary, legal chemical raw materials like 4-ANPP and NPP. If Americans buy them to synthesize fentanyl, how is that China’s fault?
By this logic, if someone is killed in a U.S. shooting, and the bullets are made from copper from Peru, should the U.S. sanction Peru? If gasoline kills someone, and it’s refined from Saudi crude oil, should the U.S. sanction Saudi Arabia?
But Trump doesn’t care. Since his first term, he’s used the fentanyl crisis as an excuse to demand that China stop producing fentanyl precursors, or else face tariffs.
Although this is completely unreasonable, China, for the sake of U.S.-China trade relations, has done a lot. For example, China has classified all fentanyl-related substances as controlled substances, established a comprehensive regulatory system covering production, distribution, and import/export, and implemented a “real-name registration, inspection, and security screening” system in the logistics industry to block fentanyl exports.
Honestly, China has gone above and beyond. Even the U.S. admits that “since China classified fentanyl-related substances in 2019, almost no fentanyl or fentanyl analogs have been found entering the U.S. from China.”
But the U.S. is unwilling to give up the fentanyl issue as a bargaining chip. In 2023, it sanctioned seven Chinese entities and six individuals, claiming they sold pill presses and molds to Mexico, which were used to manufacture fentanyl-laced pills!
China can’t even export pill presses and molds now? That’s just ridiculous.
So, Trump’s decision to impose another 10% tariff on Chinese goods using the fentanyl issue as an excuse is completely baseless and indefensible.
In short, Trump just needs an excuse. Whether it’s true or not doesn’t matter.
If tomorrow Trump says you stepped into a room with your left foot first, endangering U.S. national security, he’ll still impose tariffs. If you argue that stepping in with your left foot is reasonable, you’ve already lost.
So, when dealing with someone like Trump, never fall into the trap of self-justification. Just hit back hard. Weakness will only make Trump more aggressive.
Second, Trump’s tariffs aren’t part of some grand strategy. It’s just about one thing: money.
Some say Trump’s tariffs are about geopolitical pressure or bringing manufacturing back to the U.S. But judging from the chaos in the White House, Trump’s team is a mess, and his strategic thinking isn’t that deep. He’s imposing tariffs for one simple reason: he wants money.
He needs money!
When Trump took office, the U.S. national debt was $36.4 trillion.
The larger the debt, the higher the interest costs. In the 2024 fiscal year, the U.S. Treasury’s net interest payments reached $882 billion, accounting for about 18% of federal revenue—more than the defense budget!
Moreover, before leaving office, Biden spent all the money he could on foreign aid, leaving Trump with a financial disaster.
To make matters worse, the Congressional Budget Office predicts that U.S. debt will increase by another $25 trillion over the next decade, meaning the debt will grow by $1 trillion roughly every four months.
With the risk of a debt crisis looming, the top three foreign holders of U.S. debt are all reducing their holdings, making it increasingly difficult for the U.S. to issue debt. Trump is finding it harder and harder to fill the financial hole.
On top of that, Trump is implementing his massive corporate tax cut plan, which has further strained the already tight budget.
Even Elon Musk’s DOGE layoffs can’t make a dent in the massive financial hole.
At this point, Trump’s policy toolbox is empty. The only thing he can do is raise taxes.
But if he says he’s raising consumption taxes by 25%, Americans will revolt.
However, if he calls it a 25% tariff on foreign goods, it sounds different. With the MAGA crowd’s level of understanding, most people won’t realize they’re the ones paying for it, so they’ll just applaud and say, “Great job, President Trump!”
Moreover, Trump firmly believes that tariffs are a magic bullet for filling the fiscal gap. He’s a devoted follower of William McKinley, the 25th U.S. president.
In 1890, President McKinley introduced the McKinley Tariff Act, which raised average tariff rates by 50%, especially on high-end wool, cotton, linen, steel, and glass.
At the time, U.S. manufacturing was challenging British manufacturing, and tariffs not only boosted U.S. industry but also brought in a flood of revenue for the federal government.
Trump’s Commerce Secretary, Wilbur Ross, once said, “Before World War I, 125 years ago, we didn’t have income taxes. We relied on tariffs to fund the government. But the government made so much money from tariffs that they had to call in the greatest businessmen to figure out how to spend it.”
Clearly, Trump wants to emulate McKinley. In his inaugural address, Trump vowed to “put the name of the great President William McKinley back on Mount McKinley,” saying, “It belongs there. President McKinley made our country very rich through tariffs and talent.”
So, Trump keeps imposing tariffs on this country and that country, even after they’ve surrendered. This goes beyond geopolitical games—it’s just blatant money-grabbing to fill the fiscal hole.
When dealing with someone as money-hungry as Trump, negotiation or surrender won’t work. The only option is to fight back.
Third, relying solely on “tariff wars” won’t win a trade war.
Currently, Canada, Mexico, and the EU have all announced retaliatory measures against the U.S., especially China, which has already rolled out two rounds of countermeasures.
But the problem is, Trump isn’t afraid. Or rather, we’ve overestimated the impact of tariff retaliation on the U.S.
For example, Canada announced a 25% tariff on a batch of U.S. goods. What goods? Orange juice, peanut butter, wine, and coffee. How much money is that?
The EU hasn’t specified what U.S. products it will target, but based on the 2018 U.S.-EU trade war, when Europe imposed tariffs on “bourbon whiskey, motorcycles, orange juice, and soybeans,” it’s likely to be similar “red state specialties.”
As for Mexico, it only mentioned activating a “Plan B” for retaliation but didn’t specify what that entails.
Honestly, these retaliatory measures pose little threat to Trump. He knows that Canada and Mexico don’t have enough leverage to fight back.
Canada and Mexico’s largest trading partner is the U.S. Over 77% of Canada’s exports go to the U.S., and Mexico’s trade with the U.S. accounts for about 62% of its total trade.
While this brings huge trade surpluses, it puts them at a disadvantage in a trade war.
If the U.S. imposes $100 billion in tariffs on Canada and Mexico, they can retaliate with $100 billion in tariffs on U.S. goods. If the U.S. raises it to $300 billion, Canada and Mexico can barely keep up. But when Trump increases the tariff scope to $400 billion, Canada and Mexico can’t retaliate anymore because they only import about $300 billion worth of U.S. goods.
Thus, they’re destined to lose a trade war.
With this confidence, Trump can wage trade wars without fear.
China faces a similar situation. In 2024, China exported $524.656 billion worth of goods to the U.S. and imported $163.624 billion from the U.S. This means China’s retaliatory ceiling is $163.624 billion. If the U.S. escalates further, China can’t keep up. That’s why China’s second round of countermeasures only targeted some insignificant agricultural products.
So, does this mean the trade war is destined to be lost? Not necessarily.
China’s countermeasures go beyond tariffs, including export controls on key metals, an antitrust investigation into Google, and an unreliable entity list.
Why take this approach? Because China has seen through Trump’s “deficit fallacy.”
Trump keeps harping on about the $300 billion U.S.-China trade deficit, claiming China has taken advantage of the U.S.
But is that really the case? No.
If you only look at goods, China does have a significant surplus. But if you look at services, the U.S. is the clear winner.
For example, we all know about the “Apple tax”—the 15% to 30% commission Apple takes on digital goods and services sold through the App Store. When you make a payment in an Apple app, 30% goes to Apple.
Strictly speaking, this is part of U.S.-China trade. In 2023, Apple tax alone brought in $22.34 billion for the U.S., but this isn’t counted in goods trade.
There are many similar examples. Chinese people use Android phones, and phone manufacturers pay licensing fees to Google. Chinese people go to the cinema to watch American movies, and the theaters share revenue with U.S. producers. Chinese people visit Disneyland, Universal Studios, watch NBA games, hire U.S. lawyers and accountants, use U.S. patents, and buy GPT memberships—all of which involve paying money to the U.S.
This is the service trade—an invisible but significant source of income.
In 2024, U.S. service trade totaled $1.9 trillion, making it the world’s largest service trade surplus country, and China has long been a major source of that surplus.
So, when goods trade countermeasures reach their limit, it’s time to target the service trade, where the U.S. makes easy money, and make them feel the pain.
On February 4, China announced that, due to suspected violations of the Anti-Monopoly Law, the State Administration for Market Regulation had launched an investigation into Google. Recently, foreign media also reported that China is considering investigating Apple’s “Apple tax.”
At the same time, China’s Ministry of Commerce added PVH Corp. and Illumina to the unreliable entity list.
Clearly, after seven years of trade wars, China has gained rich experience in dealing with Trump and is now more adept at responding.
Canada, Mexico, and the EU, take note—China has shown you how it’s done!
Part Three
So, will Trump’s “tax everything” plan succeed?
From a purely money-making perspective, maybe.
After all, the U.S. is still the world’s largest economy and a consumption-driven one. Even if Americans have to bear the cost of these tariffs, in the short term, the problem of filling the fiscal gap might be solved.
But what will the consequences be?
Isolation from the world.
Fighting on multiple fronts is a military taboo, and Trump’s headstrong approach to waging war on the entire world isn’t just about decoupling from China—it’s about decoupling from the world.
What’s more interesting is that this is just the beginning.
From the current situation, with Trump imposing tariffs on Canada and Mexico, the North American Free Trade Agreement is essentially dead. With tariffs on the EU and China, the WTO is basically dead. What if tomorrow Trump goes crazy and withdraws from the UN and NATO?
The U.S. may be “first” and “great,” but has Trump considered that he’s dismantling the very foundations of U.S. hegemony?
Currently, China’s economic influence and political influence are severely mismatched. It’s incredibly difficult for China to tear open a gap in an established international order that has been in place for decades.
But by isolating itself from the international community and weakening its leadership, isn’t Trump giving China a huge opportunity?
Right now, China is reshaping the global trade landscape through the Belt and Road Initiative. Under the RCEP framework, ASEAN has become the largest export market for textiles. The China-Europe Railway connects Yiwu’s small goods with European milk, creating a wealth chain across Eurasia. Cross-border e-commerce platforms like SHEIN are gradually replacing the old international trade order with a decentralized model.
In this great transformation, if the EU wants to remain a player at the table and avoid being harvested by the U.S., it has no choice but to strengthen cooperation with China.
On March 2, Bernd Lange, Chairman of the European Parliament’s International Trade Committee, called for repairing EU-China relations, saying Europe and China have “many common interests.” Even the famously anti-China EU President Ursula von der Leyen, at the recently concluded World Economic Forum in Davos, expressed willingness to expand mutually beneficial trade and investment relations with China.
Honestly, we still prefer to see Europeans in their defiant state.
As China seizes this opportunity to establish a new trade order, one wonders if Trump will regret the decisions he made in early 2025.
The smoke of the tariff wars will eventually dissipate, but the scales of history are quietly tilting.
As the U.S. locks itself into the cage of isolationism with a “tariff iron curtain,” China is using the key of a “community with a shared future for mankind” to open the door to a multipolar world.
In this grandest restructuring of the 21st century, the greatest irony may be that the person who desperately wanted to “make America great again” has become the gravedigger of American greatness.
As the biggest beneficiary, what should China say? Thank you, Trump. Trump, taxes, taxes, and more taxes!
