China’s Trade War Isn’t With Washington. It’s With Everyone
Most of the commentary on the current tariff battles still frames them as a bilateral contest, Washington versus Beijing, with everyone else watching from the sidelines.
Ross Babbage’s recent piece in The Australian Financial Review makes the more important point: that framing is wrong, and it’s wrong in a way that matters for how the rest of us think about our own exposure.
What’s actually underway is a trade war between China and most of the rest of the world: Democracies, developing economies, and industrial powers with very little else in common, converging independently on the same conclusion.
The scale of the imbalance Babbage lays out is worth sitting with.
China’s manufacturing output was half that of the United States in 2004; twenty years later it’s double. That is not the product of a single policy or a single administration’s failure to compete. It’s the output of a deliberate, sustained architecture.
Babbage identifies four structural levers behind it:
- A protected home market of 1.4 billion consumers that lets Chinese firms build scale no competitor can match;
- State subsidies the OECD estimates at three to five times the levels seen in other major economies;
- A currency the IMF assesses as undervalued by 20-40%, making Chinese exports artificially cheap and foreign imports into China artificially expensive
- And an extensive state apparatus, commercial intelligence, industrial-scale IP theft, cyber operations, information campaigns, and the corruption of foreign officials and executives, that operates alongside and in support of Chinese companies abroad.
The result, as he notes, is a Chinese trade surplus that has reached $1.2 trillion: the largest ever recorded by any country in history.
What makes this a genuinely global story rather than a U.S. one is the response.
The tariff wall now being built against Chinese electric vehicles spans political systems and economic models that agree on almost nothing else: 102% in the United States, 75-125% in India, 80-125% in Thailand, 60% in Pakistan, 65-95% in Egypt, a quota-plus-100% arrangement in Canada, a flat 200% on Chinese light manufactured goods in Indonesia. The European Union, facing a tenfold increase in Chinese EV exports over two years, is expected to announce its own package of tariffs and quotas before year’s end after Beijing declined to restrain the flow voluntarily.
Babbage’s most telling data point isn’t a tariff number at all — it’s a vote. At the recent G20 finance ministers’ meeting, the chair proposed a joint statement calling on countries with “excessive and persistent external surpluses” to remove the distortions producing them. Nineteen countries voted yes. China voted no, alone.
That is not friction between two great powers. That is isolation.
Canberra has its own direct experience of what sits behind these numbers. Beijing’s ban on Australian exports during the pandemic was a preview of the coercive leverage that trade dependency creates, and Tokyo is living through a version of the same pressure now, via tightened Chinese controls on rare earth exports.
Babbage’s argument is that these aren’t isolated incidents to be managed one at a time; they’re symptoms of a structural imbalance that tariffs alone won’t fix.
The deeper conversations now underway about decoupling more completely from Chinese supply chains, and about the shape of a free-trading community that would exclude China, Russia, North Korea and Iran are where the real stakes lie.
His closing point deserves emphasis: Australia should be helping write the rules of that new architecture, not waiting to see what others decide for it.
That’s also where this analysis needs to go next.
The trade war Babbage describes is systemic, but it’s being fought instrument by instrument, and no single instrument illustrates the mechanics better than the electric vehicle.
In the next piece, I’ll look at BYD specifically: how one company’s global expansion embodies each of the four levers Babbage identifies, and how it fits the “Architecture of Dependency” framework Kenneth Maxwell and I developed in looking at China’s informal empire in Australia and Brazil.
The tariff numbers tell you the world is reacting.
BYD’s strategy tells you what it’s reacting to.