One significant exception existed when Donald Trump backed out of his proposal to levy exorbitant tariffs on international trading partners: China.

China would be much more squeezed, even though the rest of the world would be granted a 90-day reprieve from more charges on top of the new 10% tariffs on all US trading partners. Trump increased the tax on Chinese imports to 125% on April 9, 2025.

Trump claimed that Beijing’s “lack of respect for global markets” was the reason behind the action. However, the U.S. president might have been taking note of Beijing’s seeming readiness to take on U.S. tariffs directly.

Many nations chose to engage in communication and negotiation rather than respond against Trump’s now-delayed reciprocal tariff rises, but Beijing adopted a different strategy. It retaliated with prompt and decisive actions. China increased its own tariff against the United States to 125% on April 11 after dismissing Trump’s actions as a “joke.”

There is currently a full-scale, intense trade conflict between the two economies. Furthermore, there are no indications that China will back down.

Furthermore, as a specialist in U.S.-China relations, I do not think China will. China currently has significantly more clout than it did during the first U.S.-China trade war during Trump’s first term, when Beijing aggressively sought to negotiate with the U.S.

In fact, Beijing thinks it can harm the United States just as much as the United States can harm it, all the while strengthening its position in the world.

A modified calculus for China

Without a question, tariffs have a negative impact on China’s export-focused industries, particularly those in the coastal regions that make toys, apparel, furniture, and household appliances for American consumers.

China’s President Xi Jinping sees a historic opportunity amid tariffs. Carlos Barria/Getty Images/AFP

But since Trump initially started raising tariffs on China in 2018, a number of fundamental economic variables have caused Beijing’s calculations to change dramatically.

Importantly, China’s export-driven economy no longer depends as much on the U.S. market. When the first trade war began in 2018, 19.8% of China’s total exports were headed to the United States. By 2023, that percentage had dropped to 12.8%. China’s “domestic demand growth” policy may be accelerated by the tariffs, releasing consumer spending power and bolstering the country’s economy.

Furthermore, although China was experiencing rapid economic expansion when it joined the 2018 trade war, the present climate is very different. Capital flight, weak real estate markets, and Western “decoupling” have all contributed to the Chinese economy’s ongoing decline.

Contrary to popular belief, the Chinese economy may have become more shock-resistant as a result of this protracted downturn. Even before the effects of Trump’s tariffs, it forced companies and legislators to take into account the hard economic realities that currently exist.

Trump’s tariffs on China might also give Beijing a convenient external scapegoat, enabling it to mobilize public opinion and place the blame for the economic downturn on American aggression.

China is also aware that the United States’ reliance on Chinese goods, especially in its supply networks, is difficult to replace. Even while direct U.S. imports from China have declined, a large number of commodities being purchased from third nations still contain raw materials or components created in China.

The U.S. was dependent on China for 532 major product categories by 2022, which was about four times as much as it was in 2000. At the same time, China’s dependence on U.S. goods was reduced by half.

A related public opinion calculation is that rising tariffs are anticipated to raise prices, which may cause American consumers—especially blue-collar voters—to become dissatisfied. In fact, Beijing thinks that Trump’s tariffs run the risk of causing the formerly robust U.S. economy to enter a recession.

On July 7, 2017, in Hamburg, Germany, U.S. President Donald Trump turns to face Chinese President Xi Jinping during the G20 Summit plenary session. Mikhail Svetlov/Getty Images photo

Strong instruments for retaliation

China has several strategic instruments at its disposal for revenge against the United States in addition to the altered economic circumstances.

According to some estimates, it supplies over 72% of the rare earth imports into the United States and controls the global rare earth supply chain, which is essential to the military and high-tech industries. China added 15 American companies to its export control list on March 4 and another 12 on April 9. Many were high-tech companies that depended on rare earth elements for their goods or were U.S. defense contractors.

Additionally, China is still able to target important U.S. agriculture export industries like soybeans and poultry, which are centered in Republican-leaning areas and largely reliant on Chinese demand. Approximately 10% of American chicken exports and 50% of American soybean exports come from China. Three significant U.S. soybean exporters had their import permits withdrawn by Beijing on March 4.

Additionally, a large number of American tech companies, including Apple and Tesla, are still closely associated with Chinese manufacturing. Beijing sees tariffs as a form of leverage on the Trump administration since they threaten to drastically reduce their profit margins. Already, Beijing is apparently planning to fight back through regulatory pressure on U.S. corporations operating in China.

Beijing may yet try to split the Trump administration by using the fact that Elon Musk, a top Trump insider who has argued with U.S. trade adviser Peter Navarro over tariffs, has significant commercial interests in China.
A Chinese strategic opening?

Beijing believes the U.S. onslaught against its own trade partners has provided a generational strategic opportunity to remove American hegemony, even though it believes it can withstand Trump’s sweeping tariffs on a bilateral basis.

Near home, this change has the potential to drastically alter East Asia’s geopolitical environment. Following Trump’s initial tariff hike on Beijing, China, Japan, and South Korea held their first economic meeting in five years on March 30 and promised to go forward with a trilateral free trade agreement. Given how meticulously the United States had worked to develop its South Korean and Japanese friends during the Biden administration as part of its strategy to offset Chinese regional power, the decision was especially noteworthy. According to Beijing, Trump’s actions present a chance to directly weaken American influence in the Indo-Pacific.

Similarly, Southeast Asian countries, which were also a top strategic regional focus under the Biden administration, might become closer to China as a result of Trump’s high tariffs on them. In an effort to strengthen “all-round cooperation” with neighbors, Chinese official media said on April 11 that President Xi Jinping would make state visits to Vietnam, Malaysia, and Cambodia from April 14–18. Notably, the Trump administration targeted all three Southeast Asian countries with reciprocal duties that have since been paused: 24% on Malaysian goods, 49% on Cambodian goods, and 46% on Vietnamese exports.

An even more enticing strategic potential is located farther away from China. The transatlantic alliance that aimed to decouple from China may be weakened as a result of Trump’s tariff policy, which has already led China and EU officials to consider bolstering their own previously tense trade relations.

The European Commission’s president and China’s premier spoke over the phone on April 8 and unanimously denounced U.S. trade protectionism while promoting free and open trade. Ironically, the EU announced its first round of retaliatory measures on April 9, the day China increased duties on U.S. goods to 84%. These measures included a 25% duty on a few U.S. imports valued at over €20 billion, but their implementation was postponed after Trump’s 90-day halt.

Officials from the EU and China are now discussing current trade restrictions and preparing for a full-scale conference in China in July.

Last but not least, China believes that Trump’s tariff policies could devalue the US dollar globally. The dollar’s value has decreased as a result of widespread tariffs placed on several nations, which have eroded investor confidence in the American economy.

The dollar and U.S. Treasury bonds have always been seen as safe haven investments, but recent market turbulence has called into question that perception. Simultaneously, high tariffs have weakened confidence in the currency and the US Treasury by generating questions about the sustainability of the US economy and its debt.

Parts of the Chinese economy will undoubtedly suffer from Trump’s tariffs, but Beijing seems to have a lot more options this time. It is capable of seriously harming American interests, but more significantly, Trump’s full-scale tariff war is giving China a unique and unheard-of strategic advantage.The Discussion