When Donald Trump pulled back on his plan to impose eye-watering tariffs on buying and selling companions internationally, there was one key exception: China.
Whereas the remainder of the world can be given a 90-day reprieve on extra duties past the 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 goods to 125%.
The transfer, in Trump’s telling, was prompted by Beijing’s “lack of respect for international markets.” However the U.S. president could effectively 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 an alternative favoring negotiation and dialogue, Beijing took a special tack. It responded with swift and agency countermeasures. On April 11, China dismissed Trump’s moves as a “joke” and raised its own tariff in opposition to the U.S. to 125%.
The 2 economies are actually locked in an all-out, high-intensity commerce standoff. And China is exhibiting no indicators of backing down.
And as an skilled on U.S.-China relations, I wouldn’t count on China to. Not like the first U.S.-China trade war 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 could inflict at the least as a lot harm on the U.S. as vice versa, whereas on the similar time increasing its international place.
A modified calculus for China
There’s little question that the consequences of tariffs are severe for China’s export-oriented manufacturers – particularly these within the coastal areas producing furnishings, clothes, toys and residential home equipment for American customers.
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However since Trump first launched a tariff increase 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 financial system has declined considerably. In 2018, firstly of the primary commerce conflict, 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 customers and strengthening its home financial system.
And whereas China entered the 2018 commerce conflict in a section of robust financial development, the present state of affairs is kind of completely different. Sluggish real estate markets, capital flight and Western “decoupling” have pushed the Chinese language financial system right into a interval of persistent slowdown.
Maybe counterintuitively, this extended downturn could have made the Chinese language financial 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 affect 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, notably 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 elements or uncooked supplies.
By 2022, the U.S. relied on China for 532 key product classes – almost 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 prices, one thing that might stir discontent amongst American customers, notably blue-collar voters. Certainly, Beijing believes Trump’s tariffs threat pushing the beforehand robust U.S. financial system toward a recession.
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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 navy 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 control list, adopted by another 12 on April 9. Many have 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 equivalent 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 nearly 10% of American poultry exports. On March 4, Beijing revoked import approvals for three major U.S. soybean exporters.
And on the tech aspect, many U.S. firms – equivalent to Apple and Tesla – stay deeply tied to Chinese language manufacturing. Tariffs threaten to shrink their profit margins significantly, 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. trade adviser Peter Navarro against tariffs, has major business interests in China is a very robust wedge that Beijing might but exploit in an try and divide the Trump administration.
Johannes Eisele/AFP via Getty Images
A strategic opening for China?
Whereas Beijing thinks it could 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 might 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 economic dialogue in 5 years and pledged to advance a trilateral free commerce settlement. The transfer was notably outstanding given how fastidiously the U.S. had labored to domesticate its Japanese and South Korean allies during the Biden administration as a part of its technique to counter Chinese language regional affect. From Beijing’s perspective, Trump’s actions supply a possibility to instantly erode U.S. sway within the Indo-Pacific.
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Equally, Trump’s steep tariffs on Southeast Asian nations, which have been additionally a major strategic regional priority through the Biden administration, could push these nations nearer to China. Chinese language state media introduced on April 11 that President Xi Jinping will 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 have 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 previously strained trade ties, one thing that might weaken the transatlantic alliance that had sought to decouple from China.
On April 8, the president of the European Fee held a call with China’s premier, throughout which each side collectively condemned U.S. commerce protectionism and advocated without cost and open commerce. Coincidentally, on April 9, the day China raised tariffs on U.S. goods 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 existing trade barriers and contemplating a full-fledged summit in China in July.
Lastly, China sees in Trump’s tariff coverage a possible weakening of the international standing of the U.S. dollar. Widespread tariffs imposed on a number of nations have shaken investor confidence within the U.S. financial system, contributing to a decline in the dollar’s value.
Historically, the greenback and U.S. Treasury bonds have been considered as haven belongings, however recent market turmoil has cast doubt on that status. On the similar time, steep tariffs have raised issues in regards to the health of the U.S. economy 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 financial 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 conflict is offering China with a uncommon and unprecedented strategic alternative.
