When Simple Math Shakes the World Economy: Will China Respond with Complex Policy?

By Moatasim Al Khatib

Apr 21, 2025

In today’s interconnected global economy, facts and figures are the foundation of sound policy. When those figures are misused or misunderstood, the ripple effects can be significant—altering trade flows, disrupting markets, and creating uncertainty among businesses and governments alike. This was particularly evident during the Trump administration’s imposition of broad tariffs based on what was presented as a reciprocal and corrective trade policy. However, as subsequent analysis revealed, the methodology used to justify these tariffs was not rooted in actual tariff data or verified economic indicators. Rather, it relied on a simplistic formula that misrepresented trade imbalances as evidence of unfair treatment—an approach that introduced confusion into an already delicate global economic environment.

U.S. President Donald Trump holds a signed executive order on tariffs, in the Rose Garden at the White House. Photo: Leah Millis/Reuters

China, while affected by this policy shift, chose a different path. Instead of reacting with short-term measures, it adopted a steady, future-oriented approach focused on resilience, regional integration, and rule-based cooperation. This article examines the flawed economic rationale behind the Trump-era tariffs and highlights the policy tools China is using to navigate such challenges and contribute to a more stable world economy.

The Misunderstanding at the Heart of “Reciprocal” Tariffs

In 2018, the Trump administration introduced a sweeping list of tariffs on imports from more than 180 countries. At the heart of this move was a visual chart displaying purported “tariff rates” that other countries allegedly imposed on the United States. However, these figures were not drawn from real tariff schedules or trade barriers. Instead, the administration took a basic approach: it divided the U.S. trade deficit in goods with a particular country by the total U.S. imports from that country, and presented the resulting percentage as that country’s “effective tariff” on U.S. exports.

For example, based on trade data with China, this calculation yielded a 67.3% “tariff”—a number that, upon closer examination, bore no resemblance to China's actual average tariff rate. Similar misrepresentations were made for other countries, with some being assigned rates as high as 90% or more, despite no such duties existing in practice. By treating a trade imbalance as proof of unfairness or discrimination, this method conflated complex economic relationships with political messaging. Trade deficits, after all, are not inherently negative—they often reflect consumer preferences, supply chain integration, and comparative advantages. Economies naturally develop surpluses and deficits with different partners, just as individuals spend more at certain stores than they earn from them. This does not indicate exploitation; it indicates specialization and interdependence.

Global Impact: Uncertainty and Market Disruption

The consequences of such a miscalculation extended far beyond statistical debates. International companies, already operating in a competitive and fast-changing environment, were forced to navigate shifting tariff regimes and anticipate policy changes driven by unpredictable logic. For many, this created hesitation in investment and expansion plans, especially when tariff rates were based not on structured trade talks or WTO rules, but on one-sided formulas lacking transparency or economic rigor.

Furthermore, countries with trade surpluses with the United States—those buying more American goods than they sold—were also assigned arbitrary tariffs, despite theoretically being in compliance with U.S. goals. The outcome was a tariff structure that was neither reciprocal nor fair, increasing global economic friction at a time when multilateralism was most needed.

China’s Policy Response: Calm, Consistency, and Cooperation

Amid such challenges, China’s response was notable not for its rhetoric, but for its policy coherence. Rather than engaging in reactive countermeasures, China pursued a strategy that emphasized economic modernization, regional cooperation, and institutional strength.

1. Strengthening Multilateral Trade Frameworks: China reaffirmed its commitment to multilateral trade, becoming a core advocate of the Regional Comprehensive Economic Partnership (RCEP)—the world’s largest trade agreement. This demonstrated China’s willingness to uphold open, inclusive trade that benefits all participants, particularly developing countries seeking equitable access to global markets. At the same time, China supported efforts to reform and enhance the World Trade Organization (WTO), recognizing the need for a modernized system capable of addressing 21st-century trade issues while ensuring fairness and transparency for all members.

A RCEP pioneering innovation experimental base in Qingdao, east China's Shandong Province, February 14, 2023. Photo: CFP

2. Advancing the Belt and Road Initiative: Through the Belt and Road Initiative (BRI), China continued to invest in infrastructure and economic connectivity across Asia, Africa, and beyond. This initiative has helped diversify China’s trade partnerships and opened new avenues for global cooperation, especially among developing economies. By promoting trade routes, financial integration, and people-to-people exchange, the BRI has strengthened China’s economic resilience and contributed to the shared development goals of many partner nations.

3. Fostering Domestic Consumption and Innovation: With the rollout of the “dual circulation” strategy, China placed greater emphasis on domestic consumption, innovation, and technological self-reliance, while maintaining openness to global trade. This rebalancing aligns with China’s long-term vision of sustainable development, reducing overdependence on any single export market and ensuring steady growth despite external uncertainties.

People walk on the Nanjing Road pedestrian street in east China's Shanghai, February 3, 2025. Photo: VCG

Lessons for the Global Community

The Trump administration’s approach underscores a broader lesson for international economic governance: policy must be guided by evidence, not emotion. Simplistic calculations or politically driven narratives can mislead both policymakers and the public, undermining trust and cooperation. Trade disputes must be resolved through transparent dialogue, data-driven analysis, and respect for international institutions. When countries replace collaboration with unilateralism, the global economy suffers—especially the small and medium-sized enterprises that rely on stable rules to participate in international markets. China’s response demonstrates that it is possible to manage disputes with maturity and foresight. Instead of retaliating in kind, China reinforced its commitment to openness and balance, showing that strength in economic policy comes not from confrontation, but from consistency.

Looking Ahead: Building a Fairer World Economy

The post-pandemic era offers a chance for nations to rebuild a more just and sustainable global economy. Rather than repeat past mistakes, it is crucial that future trade policies are rooted in mutual benefit, not zero-sum thinking. China’s emphasis on infrastructure connectivity, multilateralism, and domestic resilience offers a model of pragmatic internationalism. It reminds the world that, even in periods of tension, cooperation and reason remain the most powerful tools for progress. As we move forward, let us recognize that global trade is not a scoreboard of winners and losers, but a shared system of value creation. And in safeguarding that system, countries like China—through calm policy, global engagement, and strategic vision—will continue to play a vital leadership role.

About the Author

Moatasim Al Khatib ( 王伟): UAE-born Master's student at Tsinghua University’s School of Public Policy and Management, where he is a scholarship recipient. Before moving to Beijing, he worked in private sector consulting for the public sector and later served as a Data and Economics Specialist for the UAE government. He has also worked with non-profit organizations in the Middle East and Scandinavia. He has a keen interest in China and is the co-founder of the Global Sino Institute, a think tank initiative focused on fostering global dialogue on China’s economic and policy landscape. His research interests include public policy, institutions, and macroeconomics, and he aspires to pursue a PhD in National Economics.

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