It took Donald Trump less than a week to pull back on his plan to impose eye-watering tariffs on trading partners across the world.
But he didn’t back down as far as China goes. As the rest of the world received a 90-day reprieve on additional duties beyond the new 10% tariffs on all U.S. trade partners, China is bound to feel the squeeze even more.
On April 9, 2025, Trump raised the tariffs on Chinese goods to 125%. The move, in Trump’s point of view, was only caused by Beijing’s “lack of respect for global markets.”
However, the United States president might well have been smarting from Beijing’s apparent willingness to confront U.S. tariffs head on.
Even if many countries decided not to retaliate against Trump’s reciprocal tariff hikes (which allegedly led him to have a change of heart), Beijing took a different approach instead of favoring negotiation and dialogue.
China responded with swift and firm countermeasures. On April 11, China dismissed Trump’s moves as a “joke,” raising its own tariff against the U.S. to 125%.
The two economies now seem to be locked in an all-out, high-intensity trade standoff. And China, in all honesty, doesn’t show any signs of backing down.
And if you ask any expert on U.S.-China relations, they will tell you that China won’t do so anytime soon.
Unlike the first U.S.-China trade war during Trump’s initial term, when Beijing eagerly tried to negotiate with the United States, China now holds more leverage.
In fact, Beijing believes it can inflict at least as much damage on the United States as vice versa, while also expanding its global position.
A major change in calculus for China
No one doubts the fact that the consequences of tariffs are quite severe for China’s export-oriented manufacturers.
In fact, this goes even further in the coastal regions, producing furniture, clothing, toys, and home appliances for American consumers.
However, since Trump first launched a tariff increase on China back in 2018, an increasing number of underlying economic factors have drastically shifted Beijing’s calculus.
In other words, the importance of the U.S. market to China’s export-driven economy has significantly declined.
In 2018, at the start of the first trade war, U.S.-bound exports accounted for no less than 19.8% of China’s overall exports.
In 2023, the figure dropped to 12.8%, The tariffs might have further prompted China to speed its “domestic demand expansion” strategy, unleashing the spending power of its consumers, as well as strengthening its domestic economy.
As China entered the 2018 trade war in a phase of well-settled economic growth, the ongoing situation is a bit different. Sluggish real estate markets, capital flight, as well as “Western decoupling,” have only pushed the Chinese economy into a period of persistent slowdown.
Maybe a bit counterintuitive, this prolonged downturn could have made the Chinese economy more resilient to shocks.
It has also pushed businesses and policymakers to come to factor in the already existing harsh economic realities, even before the impact of Trump’s tariffs.
His tariff policy against China will also offer the right context now to make Beijing a useful external scapegoat, allowing it to rally public sentiment and shift the blame for the economic slowdown onto the United States’ aggression.
China also knows that the United States can’t easily replace its dependency on Chinese goods, especially through its supply chains.
As direct United States imports from China have decreased, there are many goods that are now imported from third countries that are still dependent on Chinese-made components or raw materials.
I mean, only by 2022, the U.S. relied on China for 532 key product categories, which is four times more than in 2000, as China’s reliance on United States products was cut by half in the same amount of time.
There’s also a related public opinion calculation. Rising tariffs are now expected to drive up prices, something that could easily stir discontent among American consumers, especially blue-collar voters.
Indeed, Beijing thinks that Trump’s tariffs risk pushing the previously strong United States economy toward a recession.
Potent tool for retaliation
Alongside the changed economic environments, China also holds quite a large number of strategic tools for retaliation against America.
In fact, it completely dominates the global rare earth supply chain, which is critical to military and high-tech industries, supplying roughly 72% of the United States’ rare earth imports, by some estimates.
On March 4, China placed no less than 15 American entities on its export control list, followed by yet another 12 on April 9.
Many of them were United States contractors, or simply high-tech firms, highly reliant on rare earth elements for their products.
Moreover, China holds the ability to target some of the most important U.S. agricultural export sectors, including poultry and soybeans, industries that heavily rely on Chinese demand and are concentrated in Republican-leaning states.
The Asian super-power also accounts for half of U.S. soybean exports, and almost 10% of American poultry exports. On March 4, Beijing revoked import approvals for three important U.S. soybean exporters.
On the tech side, many U.S. companies, like Apple and Tesla, remain deeply linked to Chinese manufacturing.
Tariffs also threaten to shrink their profit margins a great deal, which is something that might be used as leverage against the Trump administration.
Already, Beijing is reportedly planning to strike back through regulatory pressure on United States companies operating in China.
In the meantime, the fact that Elon Musk, a senior Trump insider who has clashed with United States trade adviser Peter Navarro against tariffs, has huge business interests in China, and it represents quite a particularly strong wedge that Beijing could exploit as an attempt to divide the Trump administration.
In fact, Beijing is already planning to strike back through regulatory pressure on United States companies that operate in China.
In the meantime, the fact that Elon Musk, a senior Trump insider who has already clashed with U.S. trade adviser Peter Navarro against tariffs, has huge business interests in China, and is yet another strong wedge Beijing might consider exploiting as an attempt to divide the Trump administration.
A strategic opening for the Communist country
As Beijing thinks it can weather Trump’s sweeping tariffs on a bilateral basis, it also thinks the United States’ broadside against its own trading partners has only made a generational strategic opportunity to displace American hegemony.
Well, quite close to home, the shift could drastically reshape the geopolitical landscape of East Asia. Already on March 30, after Trump had already raised tariffs on Beijing, China, Japan, and South Korea hosted their very first economic dialogue in five years, pledging to advance a trilateral free trade agreement.
The move was even more so remarkable, considering how carefully the United States worked to cultivate its Japanese and South Korean allies, especially during the Biden administration, as part of its wider strategy to counter Chinese regional influence.
From Beijing’s POV, Trump’s actions offer quite an opportunity to directly erode U.S. sway in the Indo-Pacific.
On a very similar note, Trump’s steep tariffs on Southeast Asian countries, which were also quite a major strategic regional priority throughout Biden’s administration, could push those nations much closer to China.
Chinese state media announced on April 11 that President Xi Jinping might pay a state visit to Vietnam, Malaysia, and Cambodia from April 14-18, as an attempt to establish “all-round cooperation with neighboring countries.
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