China Tariffs Reduce Funding for Beijing’s Military

Xi Jinping’s goal is to have the People’s Liberation Army (PLA) ready for a Taiwan invasion by 2027 and to surpass the US military by 2035. The PLA’s modernization costs money that Beijing gets from Americans who invest in China and/or purchase Chinese imports.

The media keeps blaming Trump, saying the tariffs he put on Chinese imports were ineffective because they made Chinese products more expensive, which was inconvenient for Americans. They also warn that if you vote for Trump in 2024, the tariffs are likely to go up.

As a trained economist, I can assure you that the purpose of the tariffs was to make Chinese products more expensive, aiming to deter Americans from purchasing them. Therefore, they were extremely effective in achieving this goal. The only Americans who found them inconvenient were those who refused to buy American-made products.

About half of China’s exports are manufactured by foreign companies in China. The tariffs cause these nations to relocate their factories to other countries, mostly Mexico, India, Indonesia, and Vietnam, in order to avoid tariffs. Not only does this decoupling reduce the amount of money Beijing can allocate toward the military, but it also cuts China’s foreign direct investment (FDI). Now, China’s net investment has gone negative, hitting a 30-year low. Factory activity is trending downward. Manufacturers are facing deflation, and youth unemployment hit 21.3%. To make the numbers look better, Beijing stopped reporting. But even after inventing a new definition for “youth unemployment,” the rate remains at a dismal 15% and continues to climb.

Mainstream media also has a lot of “smoking gun” articles where they reveal the shocking claim that the tariffs backfired because they are actually paid by American consumers, not China. Once again, yes, this is exactly how tariffs are meant to work. The price is raised by a tariff, which is a tax. The tariff is paid by the purchaser, not the seller, and the tariff revenue goes to the United States government, not Beijing.

The increased price of tariffed products is a blow to Beijing’s income, because it reduces demand for Chinese products, as explained above. They also create leeway for American companies to enter the market. The main reason companies manufactured in China before was because it was cheaper, and by manufacturing in the US, the product price would be too high and could not compete with products made in China. The tariffs raise the price of Chinese products so that US companies can afford to manufacture and sell them.

This brings manufacturing back to the U.S. It also removes China from our supply chains, making our nation stronger in the event of war.

The Trump tariffs caused several changes within China that helped bring manufacturing back to the US. First, the increased cost of the tariffs makes manufacturing in China more expensive. Second, as US and foreign companies pull out of China and unemployment rises, Chinese consumers have less money to spend. So, there is less of a market in China for US products. Brands like Nike and Apple found it affordable to manufacture in China because they could offset the rising labor costs with domestic sales in China. Now, those sales are winding down. At the same time, Xi Jinping is pushing propaganda encouraging patriotic Chinese to buy Chinese-made products, further reducing the market for US manufacturers. This incentivizes American companies to manufacture in the US or in a friendlier country.

Another added benefit to the US and allied nations pulling their factories out of China is that it reduces China’s opportunity for intellectual property (IP) theft. China’s technological rise is largely predicated on stealing IP from the US and other nations. Putting a stop to this theft will set China back by decades.

One of the main pieces of evidence that mainstream media cited to claim that the trade war was a failure was the fact that the tariffs had failed to reduce the U.S. trade deficit with China. However, they will need to start printing apologies because not only has Mexico displaced China as the US’s top trading partner, but the US trade deficit with China has been steadily decreasing.

Reducing Beijing’s income with tariffs, investment bans, and sanctions is crucial for national security. In addition to threatening the U.S. directly, China is the primary economic benefactor of North Korea, Russia, and the Taliban. Additionally, Iran is using the money it earns from China to fund Hamas, Hezbollah, and the Houthis.

One point where the mainstream media is right, however, is that the tariffs could be more effective. This is why they should be raised. A 60% tariff, as Trump is promising, if he is reelected, would be the final nail in the coffin for China as the world’s factory. No one could afford to manufacture there anymore.

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