Trade face-off: Will the US back down first or China?

Pressure on Trump seems greater than on Xi but this may only be because Chinese politics is opaque

- NITIN PAI

You might be able to think of a dozen ways through which a public backlash might compel Donald Trump, the President of the United States, to back down on his tariffs imposed on Chinese goods. But if I were to ask you to imagine the kind of pressures that would push Xi Jinping, the general secretary of the Communist Party of China, to do likewise, you will probably come up with a vague idea, if any at all.

That does not mean he is not under pressure. It only means that the politics of the United States is a lot more transparent. Both sides are under pressure. The next several weeks will be both a contest of which side can withstand greater pain and how effectively that pain is transmitted through their political processes.

We saw a glimpse of that in the first week of April when US stock markets plunged and US Treasury bond yields jumped, causing a number of Trump's billionaire backers to raise their voices against tariffs. The pain transmission mechanism was quite swift, perhaps causing Trump to pause the tariff rollout for 90 days. We can never be sure if the bond market forced the White House to hold its fire, but it is reasonable to accept that the destruction of a massive amount of financial wealth in a matter of days was a significant factor.