Has China Defeated The US
By Trading Or By The US Tariff?

Lower Costs Mean Higher Budgets.

If you can buy imported products at lower prices, the lower prices allow you to save money or expand your budget as if your income has increased thanks to the lower production costs of the foreign exporters, in other words, due to the depreciated foreign labors in the exporting countries.

If you can pay only $1 to buy a nail clipper while you paid $7 to buy it in the past, you saved $6.  You should consider $6 as your additional income. If customers can pay less money to fulfill their needs thanks to imported products or services, the saved money can be added to the consumers’ budgets as if their incomes were increased.

Neither Equal Tariffs Nor Equal Deficits Define Fair Trading.

Fair trading should be measured by the equal economic impacts on both countries.

The negative effect of tariffs is like the forfeiture of additional incomes in the importing countries.  If a home owner received 50% discount for a home repair service, the owner can use the saved money to pay off debt.  Likewise, if the consumers of the importing country were able to save $100 billion, $100 billion should have offset the trading deficits or debts.  However, Trump administration failed to do so.

Only the difference between colonies (zero wage) and exporters (low wage) is the payment for the products or services which are forcefully deported or voluntarily exported from their countries.  However, the payment may be an illusion.

China was repositioned to buy the US Treasury bonds (debts) again in order to lower the US tariff imposed on China from 145% to 30%.  This is like vomiting after eating. No nutrition is left in the body.  Approximately $3.2 trillion was China’s foreign exchange reserves as of January 2025 for which China buys the US debts.

China’s GDP per capita PPP is expected to reach $23,112 by the end of 2025, which is only 26% of the US’s GDP per capita PPP, $89,105 (Wikipedia) by the end of 2025.  Approximately $3.2 trillion could have been used to increase China’s GDP per capita PPP if China had not been required to purchase the US Treasury bonds and hedge against US dollars to minimize the risk of fluctuating foreign exchange rates (possible depreciation of CN¥).  Japan and all other exporters face the same risk.  Those bondholders have the same fate.

The world economy should be correctly interpreted.  The US is not the richest country if you deduct the US debt from its GDP.  If you pay $10 million for an interest per year while your annual income is $10 million, are you richer than your friend whose debt is zero and annual income is $1 million? GDP PPP (Purchasing Power Parity) should be calculated by deducting debt.  How can you have a purchasing power when your debt exceeds your income?

As of today, China has defeated the US not by trading but by not pricing money with higher interest rates (by lower cost of production) and by not spending too much. 

Business Loan Interest Rates (Price Of Money) As Of May 2025

The US: 6.54~11.7%
China: 3.10%

In 2023, China’s gross domestic saving rate was 44.3% of GDP (personal: 31.7%) while the US gross domestic saving rate was 18.66% of GDP (personal: 4.51%).

Domestic Saving = GDP – Consumption Expenditure

Although the US consumers paid less money to buy products thanks to the trading with China, the savings were not deposited into their saving accounts but were likely used to spend more.

China’s foreign debt to GDP ratio was 15% in 2018 while the US ratio was 96% in 2018.  The trading deficit of the US against China in 2024 was $295.4 billion.  However, this has to be recalculated considering foreign exchange rates (interest rates) that enrich the US bankers not the US importers.  The US banks’ net income in 2024 was $268.2 billion according to FDIC.  In 2024, about $130 billion was the trade surplus of the US in financial services for trading with China.    However, Trump administration failed to recognize this additional factor that should have offset the trading deficit since this benefit is exceptionally given to the US as the fiat currency issuer.

Incorrect Textbooks Produce Incorrect Policies.

If your country has only one bottle of water ($1) and if the interest rate is 10%, the value of the water would be exaggerated (inflated) by 10% because you may buy the water at $1.10 when more people want to buy the water.  This is how the price of money (interest) causes inflation, not the other way around.  

Bankers exaggerate (bubbles) a value by pricing money. Inflation begins when money is priced.  Even if the interest rate is increased by 100%, billionaires would buy the water.  However, business schools erroneously teach that inflation is cured when money is sold with high interest rates, which is practiced by Jerome Powel who is the chair of the Federal Reserve of the US.   

Argentinean President Javier Milei (former economist) took the correct path that I suggested in 2023 through a video and an article.  He successfully slashed the inflation rate by 21% in 2024 after he had lowered the interest rate as I recommended in the video.  In May 2025, Bill Gates announced that he would close Gates Foundation and donate 98% of his assets ($200 billion), which I suggested in the video.  More responsible parties should join Gates.

Interest rates are the reason for the failed and erroneous economics simply because money is not a product to sell.  When an erroneous factor is not removed from an equation, the outcome is always erroneous.  Many incorrect economic theories have been introduced in order to cover up the errors which were intended by economists who were mostly employed as bankers in 1800s. The Knights Templar invented the banking system.

Debts should be deducted from GDP to calculate GDP PPP because you have no purchasing power when your debt exceeds your income. Savings by importing should offset trading deficits.  Economics is the subject that needs to be largely reformed like medical is.   Economic problems cannot be solved when economists rely on the incorrect or outdated theories that they have learned from 200 year-old textbooks.

Tariffs Cause Stagflation And Are Precursors Of Wars.

Tariffs trigger recession and inflation.  Tariffs are import taxes.  Tariffs are much worse than a higher rate of interest alone in terms of the amount of hidden taxes that consumers are to pay without their knowledge, which is totally opposite from what Trump guaranteed during his electoral campaign.  Trump supporters voted for Trump expecting that they would pay less tax.

Tariffs are often utilized by countries that secretly prepare wars. Those countries increase military budgets before they impose heavy tariffs on their enemy states.    After relocating their citizens and manufacturing facilities back to home countries, those countries bomb or nuke the enemy states from which their citizens were evacuated.   Hitler’s trade war was a precursor of WW2. Trump administration was scrutinized for leaking a chat about a war against China.

Trading Is A Security Insurance To Demote Wars While Tariffing Is A Weapon To Promote Wars.

If your country has no mean to produce products while your enemy state produces nearly everything for your country, your country’s desire to bomb the enemy state is suppressed and undermined.

Peace is a virtuous consequence of a trade when two countries become mature enough to realize that they can benefit from reciprocal and complementary relationships, and that they cannot simply press a button to nuke the partners.  The US consumers have received the effect of increased incomes when they purchased imported products from China.  This positive effect should have offset the US trading deficit.

Due to Trump’s tariffs, has China not defeated the US since the US consumers have lost their chances to expand their budgets (additional income effects), the US consumers ended up paying more tax as high as 30%, and the US importers are facing bankruptcy?  More seriously, the US citizens may be drafted for WW3 which may be triggered by the tariff-induced recession.  Even without tariffs, it is always safe to maintain manufacturing capacities within your countries at all time. In 2022, Hyundai Motor was forced to sell its factory for $10 (KRW14,000) to Russia losing $219 million in Russia.