China’s Latest Strategy Against Trump’s Trade War May Be Based On Sun Tzu’s Art Of War – Stays Quiet!!

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Jul 23 2018
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Beijing’s unusual silence over Donald Trump’s latest US$505 billion trade war threat has been mind-boggling. Has President Trump pressed the right button and was right when he declared that trade wars were good and easy to win? It appears so, judging by the lack of retaliation from the Chinese after Trump’s massive US$505 billion tariffs threat.


Trump should celebrate, should he not? The Chinese have been defeated easily and swiftly. But his advisers probably have advised him against popping champagne too early. After all, there’s a reason why the Chinese civilization is 5,000 years old. On the contrary, the U.S. should start worrying because neither the Chinese Commerce Ministry nor the Foreign Ministry has issued any statements.


Sun Tzu, the Chinese philosopher-general and military strategist who wrote the military classic “The Art of War”, advised – “Take advantage of the enemy’s unpreparedness, make your way by unexpected routes, and attack him where he has taken no precautions.” Therefore, it would be foolish for China to engage in a war of words with the U.S., which obviously Trump wants to engage.

Sun Tzu - Art of War

The military strategist also advised – “If the enemy is far away and challenges you to do battle, he wants you to advance, because he occupies level ground that is to his advantage.” And this is precisely why Trump keeps provoking Xi, challenging him to keep retaliating. After the first US$50 billion and second US$200 billion threats, Trump launches his third US$505 billion attack.


Donald Trump was looking forward to Xi Jinping’s response, and in the process swallows the hook, line and sinker. Last year, U.S. exports to China were only US$130 billion while imports from China were US$506 billion, hence the US$375 billion deficit. Trump’s threat of imposing tariff on the entire US$506 billion Chinese products cannot be matched by Beijing.


The Chinese state media, from the official Xinhua news agency to the notorious Global Times, did not cover Trump’s fresh threat (US$505 billion) after the instruction from Beijing not to “over-report” the trade war. Sun Tzu also advised – “If the enemy is close and remains quiet, he occupies a natural stronghold.” Perhaps China is working towards this advantageous position.

US-China Trade War - President Xi Jinping and President Donald Trump

Aside from disallowing Trump to dictate the terms and conditions of the trade war, China’s sudden silence could be sending a message that the U.S. president is bluffing. President Xi Jinping most likely wants to see what would be America’s next move. For now, the Chinese think the sudden US$505 billion threat was merely Trump’s empty rhetoric.


After his screw-up at the Helsinki Summit where Trump criticised the United States of America for its foolishness and stupidity while praising Russian President Vladimir Putin as a strong leader, all hell breaks loose. Donald Trump has been practically criticised by not only the liberals and Democrats, he was also condemned by fellow Republicans.


The threat of targeting US$500 billion of Chinese products, therefore, is seen as a tactic to divert attention. Beijing will fall into the trap if it responds accordingly. Instead, Washington is now confused with the recent depreciation of the Chinese currency – Yuan / Renminbi. Was Beijing the “hidden hand” behind the weakening of the currency to counter-attack Washington?

Girl Standing in Front of Giant China Yuan Note

As mentioned previously, Beijing could certainly annoy Trump by – quietly – devaluing its currency Yuan / Renminbi in order to quickly offset the impact of tariffs. Trump could only tweet and accuse China of manipulating its currency, as does the European Union. But he can’t be sure if such attacks were indeed unleashed from behind the Great Wall of China due to the deafening silence.


The depreciation of Chinese Yuan could be the market response to the strengthening of U.S. dollar, and not a form of retaliation and intervention from Beijing at all. By ignoring Trump’s accusation, the U.S. will be forced to make various wild and inaccurate assumptions. Without knowing the source of the problem, obviously Washington cannot tackle the issue.


U.S. Treasury Secretary Steven Mnuchin said last week the United States was monitoring the recent weakness in China’s Yuan currency and would review whether it had been manipulated. This means the tactic of staying quiet in the dark without giving hints of China’s next move proves to be more disastrous than to engage Trump in an open war of words.

China Yuan Punching Challenging US Dollar - Backed with Gold

Xi Jinping’s next strategy could involve quietly scale down on the purchase of U.S. Treasurys or even sell off some of its US$1 trillion bonds to push up the yields, making it more expensive for the U.S. government to borrow. Of course, China could make life harder for U.S. companies in the country, the same way they had done it to the Japanese and South Koreans.


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