When Donald Trump pulled again on his plan to impose eye-watering tariffs on buying and selling companions the world over, there was one key exception: China.
Whereas the remainder of the world could be given a 90-day reprieve on extra duties past the brand new 10% tariffs on all U.S. commerce companions, China would really feel the squeeze much more. On April 9, 2025, Trump raised the tariff on Chinese language items to 125%.
The transfer, in Trump’s telling, was prompted by Beijing’s “lack of respect for global markets.” However the U.S. president could properly have been smarting from Beijing’s obvious willingness to confront U.S. tariffs head on.
Whereas many nations opted to not retaliate in opposition to Trump’s now-delayed reciprocal tariff hikes, as a substitute favoring negotiation and dialogue, Beijing took a unique tack. It responded with swift and agency countermeasures. On April 11, China dismissed Trump’s strikes as a “joke” and raised its personal tariff in opposition to the U.S. to 125%.
The 2 economies at the moment are locked in an all-out, high-intensity commerce standoff. And China is exhibiting no indicators of backing down.
And as an professional on U.S.-China relations, I wouldn’t anticipate China to. In contrast to the primary U.S.-China commerce battle throughout Trump’s preliminary time period, when Beijing eagerly sought to barter with the U.S., China now holds much more leverage.
Certainly, Beijing believes it may possibly inflict not less than as a lot harm on the U.S. as vice versa, whereas on the identical time increasing its world place.
A modified calculus for China
There’s little question that the implications of tariffs are extreme for China’s export-oriented producers – particularly these within the coastal areas producing furnishings, clothes, toys and residential home equipment for American shoppers.
Amid tariffs, China’s President Xi Jinping senses a historic alternative.
Carlos Barria/AFP by way of Getty Pictures
However since Trump first launched a tariff enhance on China in 2018, a lot of underlying financial elements have considerably shifted Beijing’s calculus.
Crucially, the significance of the U.S. market to China’s export-driven economic system has declined considerably. In 2018, initially of the primary commerce battle, U.S.-bound exports accounted for 19.8% of China’s complete exports. In 2023, that determine had fallen to 12.8%. The tariffs could additional immediate China to speed up its “domestic demand expansion” technique, unleashing the spending energy of its shoppers and strengthening its home economic system.
And whereas China entered the 2018 commerce battle in a section of robust financial progress, the present state of affairs is kind of completely different. Sluggish actual property markets, capital flight and Western “decoupling” have pushed the Chinese language economic system right into a interval of persistent slowdown.
Maybe counterintuitively, this extended downturn could have made the Chinese language economic system extra resilient to shocks. It has pushed companies and policymakers to return to issue within the present harsh financial realities, even earlier than the influence of Trump’s tariffs.
Trump’s tariff coverage in opposition to China might also permit Beijing a helpful exterior scapegoat, permitting it to rally public sentiment and shift blame for the financial slowdown onto U.S. aggression.
China additionally understands that the U.S. can not simply substitute its dependency on Chinese language items, significantly by way of its provide chains. Whereas direct U.S. imports from China have decreased, many items now imported from third nations nonetheless depend on Chinese language-made parts or uncooked supplies.
By 2022, the U.S. relied on China for 532 key product classes – practically 4 instances the extent in 2000 – whereas China’s reliance on U.S. merchandise was minimize by half in the identical interval.
There’s a associated public opinion calculation: Rising tariffs are anticipated to drive up costs, one thing that would stir discontent amongst American shoppers, significantly blue-collar voters. Certainly, Beijing believes Trump’s tariffs danger pushing the beforehand robust U.S. economic system towards a recession.
U.S. President Donald Trump seems to be at Chinese language President Xi Jinping throughout the plenary session on the G20 Summit on July 7, 2017, in Hamburg, Germany.
Photograph by Mikhail Svetlov/Getty Pictures
Potent instruments for retaliation
Alongside the modified financial environments, China additionally holds a lot of strategic instruments for retaliation in opposition to the U.S.
It dominates the worldwide uncommon earth provide chain – vital to army and high-tech industries – supplying roughly 72% of U.S. uncommon earth imports, by some estimates. On March 4, China positioned 15 American entities on its export management listing, adopted by one other 12 on April 9. Many had been U.S. protection contractors or high-tech corporations reliant on uncommon earth components for his or her merchandise.
China additionally retains the power to focus on key U.S. agricultural export sectors corresponding to poultry and soybeans – industries closely depending on Chinese language demand and concentrated in Republican-leaning states. China accounts for about half of U.S. soybean exports and practically 10% of American poultry exports. On March 4, Beijing revoked import approvals for 3 main U.S. soybean exporters.
And on the tech facet, many U.S. firms – corresponding to Apple and Tesla – stay deeply tied to Chinese language manufacturing. Tariffs threaten to shrink their revenue margins considerably, one thing Beijing believes can be utilized as a supply of leverage in opposition to the Trump administration. Already, Beijing is reportedly planning to strike again by way of regulatory stress on U.S. firms working in China.
In the meantime, the truth that Elon Musk, a senior Trump insider who has clashed with U.S. commerce adviser Peter Navarro in opposition to tariffs, has main enterprise pursuits in China is a very robust wedge that Beijing may but exploit in an try to divide the Trump administration.
Chinese language and U.S. flags fly at a sales space throughout the first China Worldwide Import Expo on Nov. 6, 2018, in Shanghai.
Johannes Eisele/AFP by way of Getty Pictures
A strategic opening for China?
Whereas Beijing thinks it may possibly climate Trump’s sweeping tariffs on a bilateral foundation, it additionally believes the U.S. broadside in opposition to its personal buying and selling companions has created a generational strategic alternative to displace American hegemony.
Near residence, this shift may considerably reshape the geopolitical panorama of East Asia. Already on March 30 – after Trump had first raised tariffs on Beijing – China, Japan and South Korea hosted their first financial dialogue in 5 years and pledged to advance a trilateral free commerce settlement. The transfer was significantly exceptional given how fastidiously the U.S. had labored to domesticate its Japanese and South Korean allies throughout the Biden administration as a part of its technique to counter Chinese language regional affect. From Beijing’s perspective, Trump’s actions supply a chance to immediately erode U.S. sway within the Indo-Pacific.
Might China’s dragon economic system slay Trump’s tariffs?
Wang Zhao/AFP by way of Getty Pictures
Equally, Trump’s steep tariffs on Southeast Asian nations, which had been additionally a serious strategic regional precedence throughout the Biden administration, could push these nations nearer to China. Chinese language state media introduced on April 11 that President Xi Jinping can pay state visits to Vietnam, Malaysia and Cambodia from April 14-18, aiming to deepen “all-round cooperation” with neighboring nations. Notably, all three Southeast Asian nations had been focused with now-paused reciprocal tariffs by the Trump administration – 49% on Cambodian items, 46% on Vietnamese exports and 24% on merchandise from Malaysia.
Farther away from China lies an much more promising strategic alternative. Trump’s tariff technique has already prompted China and officers from the European Union to ponder strengthening their very own beforehand strained commerce ties, one thing that would weaken the transatlantic alliance that had sought to decouple from China.
On April 8, the president of the European Fee held a name with China’s premier, throughout which either side collectively condemned U.S. commerce protectionism and advocated totally free and open commerce. Coincidentally, on April 9, the day China raised tariffs on U.S. items to 84%, the EU additionally introduced its first wave of retaliatory measures – imposing a 25% tariff on chosen U.S. imports price over €20 billion – however delayed implementation following Trump’s 90-day pause.
Now, EU and Chinese language officers are holding talks over present commerce boundaries and contemplating a full-fledged summit in China in July.
Lastly, China sees in Trump’s tariff coverage a possible weakening of the worldwide standing of the U.S. greenback. Widespread tariffs imposed on a number of nations have shaken investor confidence within the U.S. economic system, contributing to a decline within the greenback’s worth.
Historically, the greenback and U.S. Treasury bonds have been considered as haven property, however current market turmoil has forged doubt on that standing. On the identical time, steep tariffs have raised issues concerning the well being of the U.S. economic system and the sustainability of its debt, undermining belief in each the greenback and U.S. Treasurys.
Whereas Trump’s tariffs will inevitably harm components of the Chinese language economic system, Beijing seems to have much more playing cards to play this time round. It has the instruments to inflict significant harm on U.S. pursuits – and maybe extra importantly, Trump’s all-out tariff battle is offering China with a uncommon and unprecedented strategic alternative.
