Image by NightCafeUS President Donald Trump’s war of choice against Iran may leave the US economy, with the country’s substantial energy reserves, less battered than those of most of the world. As a net oil exporter, the US’s massive trade deficit may even shrink as a consequence of this advantage and of a probable inflation-driven weakness in domestic demand.But the war, combined with the Supreme Court’s ruling outlawing most of Trump’s tariffs since the launch of his April 2025 trade campaign against the world in general and China in particular, makes a solution to US trade problems ever more difficult. Data analyzed by the Washington, DC-based Peterson Institute for International Economics suggests that cooperation with allies and trade partners is essential if the US is to reduce dependence on imports, and end China’s grip on production of key items. The latter includes rare-earth based magnets and some types of semi-conductors needed by local industry, notably automobiles.Trade data for 2025 shows that despite the President’s announced massive tariff hikes, particularly on China, real US imports for the year rose by 4 percent even as China’s share of imports fell to 9 percent, less than half what it had been in 2018. The average tariff on Chinese goods rose from 21 percent in January 2025 to about 50 percent at the end of the year. Volume imports from China fell but the slack was more than taken up by other suppliers. Although average US tariffs on the rest of the world rose from 3 percent to 18 percent, non-China imports rose by 9 percent.Two factors ensured that imports continued to grow even as importers and consumers had to absorb some increased costs. The first was the ability to switch supply chains away from China to other countries, most notably Vietnam and Mexico, but including Bangladesh and Indonesia. This process is still ongoing. In some cases, such as clothing, there was an overall fall, but many categories saw little change or even growth. In automobiles, tariffs kept China’s market share to a minimum even as Chinese cars made huge headway in global markets. But Mexico’s share of the US market continued to rise as well, partly at the expense of Canada and Europe.Meanwhile, the AI boom ensured that imports of semi-conductors soared, making Taiwan the source of half the overall increase in US imports. Countries at the lower-value end of the semiconductor industry, such as Mexico, also benefited.China demonstrates ability to copeThe year was notable for China’s demonstration that it had trade tools of its own and was prepared to weaponize them. The most significant was around rare earths and magnets, without which whole industries, notably automobiles, could come to a halt. After his April 2025 “Liberation Day” tariff grandstanding, Trump was effectively trumped by the use of rare earth and semi-conductor weapons by Chinese Supreme Leader Xi Jinping. Trump’s now-postponed meeting with Xi, supposed to have been at the end of March but delayed by the Iran invasion fiasco, leaves many issues up in the air while China’s image as a source of stability as well as a trade colossus has probably been enhanced by Trump’s Iran war.China’s strategic foresight in dominating the rare earths industry, even though it has no monopoly on the ore sources, puts it in a powerful position which can only be reduced by cooperation between other ore sources and end-user countries. That not only takes time and money but a degree of cooperation which cannot be enhanced by Trump’s insults to partners unwilling to join his “crusade’ against Iran. With the future of US tariffs now uncertain, it remains to be seen if Washington can readily cooperate sufficiently with others to reduce China’s trade leverage.Indeed, the US seems to be going out of its way to alienate as many as possible unnecessarily. The US Trade Representative is using existing legislation to investigate 16 countries for alleged overcapacity, though China is the only obvious target. And no fewer than 60 countries are to be investigated for alleged use of forced labor. This list includes the EU and Japan. Flailing around in this manner merely raises foreign sense of contempt for the administration.Meanwhile, no country is going to believe that a deal with Trump is anything but ever-negotiable according to his whims or the mood of the Supreme Court. Malaysia has already renounced the lopsided deal it made with Trump last October. Is the word of the US worth anything?