Taking cues from his background in business, US President Donald Trump uses tariffs as a bargaining chip, seemingly convinced that aggressive escalation will force US trade partners to offer significant concessions and enable him to declare a major political victory. But negotiating a trade agreement is not the same as striking a real-estate deal. The process is slower, messier and far more consequential.
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This is particularly true when the US is negotiating with China, which has both a huge economy (and thus substantial leverage) and a strong interest in withholding concessions, because yielding to Trump’s demands could undermine national pride and trigger a domestic backlash. And while Trump has a record of declaring dubious victories, it would be difficult for him to claim success in his trade war with China if he simply backed down. As a Chinese saying goes, once you are riding a tiger, it is difficult to get off.
A trade agreement between the world’s two largest national economies would be difficult to draft and nearly impossible to enforce. We saw this in 2018-19. Although the US and China reached an agreement in principle in April 2019, talks ultimately fell apart, owing to differences over the specificity of terms. Whereas the US demanded a rigid 150-page contract detailing legal reforms to be enacted by China’s national legislature, China sought a more flexible, principles-based framework that could be implemented through less visible regulatory action.
There’s also an enforcement challenge. When the US and China signed their ‘phase one’ trade deal in January 2020, Trump declared it a historic victory, touting China’s commitment to increase purchases of US goods and services by $200 billion over two years, along with other concessions. But unlike typical trade agreements, the deal contained no neutral third-party enforcement mechanism. Nor was it self-enforcing, with both parties seeing compliance as more beneficial than defection. So, when China failed to meet its purchase targets, the US, then led by Joe Biden, had little recourse.
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Today, even if steep tariffs are to be lifted for now, China has little reason to believe that the US will honour its commitments or pursue meaningful enforcement, given the mistrust that Trump has sowed. Ultimately, any trade deal that the US and China negotiate is likely to be fragile, limited in scope and vulnerable to collapse. Businesses and investors should thus be prepared for continued disruptions across global supply chains.
Trump’s trade war has already done lasting harm to global supply chains. Retailers scrambled to cancel orders, manufacturers and distributors rushed to reroute and stockpile inventories, and businesses have been operating in a climate of high uncertainty. It is now clearer than ever that small and short-lived fluctuations can cause disproportionate and long-lasting disruptions, or what supply-chain experts call the ‘bullwhip effect.’
This phenomenon is reflected in the outlook for Christmas this year. If a made-in-China toy is to reach store shelves in the US before that, production must begin as early as March, when toy companies finalize product designs and place orders. Manufacturing typically starts in April, with goods shipping from Chinese factories by July, so that they arrive in the US before fall.
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Fluctuating tariffs disrupt every stage of this process. Faced with unpredictable costs, retailers hesitate to place orders, delaying production and shipment. Suppliers then reconfigure production lines to take advantage of any new opportunities, meaning that the reversal of tariffs alone may not be enough to get production back on track. So, even if tariff elimination revives demand, supply may fall short, driving retail prices in the US higher.
Making matters worse, higher prices could send the wrong demand signal to suppliers, aggravating the long-term problem of oversupply that tariffs are meant to tackle. This cycle of oscillation, a hallmark of the bullwhip effect, creates waves of instability. After all, it’s not the average that kills you; it’s the volatility. We saw a version of this dynamic during the pandemic, when sudden shutdowns triggered cascading shortages and gluts across global supply chains, with effects that were felt for years. The difference now is that the turmoil is not the result of a natural disaster or public-health crisis; it is the product of a deliberate policy.
Unpredictability may have worked for Trump in his own business dealings, but when applied to global commerce, it generates chaos, as supply chains thrive on certainty, not bluffs and policy reversals. The disruption unleashed by Trump’s tariffs will reverberate through factories, ports and stores worldwide. Investors, policymakers and consumers have yet to reckon fully with the consequences. ©2025/Project Syndicate
The authors are, respectively, the author of ‘High Wire: How China Regulates Big Tech and Governs Its Economy,’ and a professor of management science and operations at London Business School.