TRADE WARSIn Trade War with the U.S., China Holds a Lot More Cards Than Trump May Think − in Fact, It Might Have a Winning Hand
While Trump’s tariffs will inevitably hurt parts of the Chinese economy, Beijing appears to have far more cards to play this time around, compared to the tariff conflict between the two countries during Trump’s first term in the White Houser. It has the tools to inflict meaningful damage on U.S. interests – and perhaps more importantly, Trump’s all-out tariff war is providing China with a rare and unprecedented strategic opportunity.
When Donald Trump pulled back on his plan to impose eye-watering tariffs on trading partners across the world, there was one key exception: China.
While the rest of the world would be given a 90-day reprieve on additional duties beyond the new 10% tariffs on all U.S. trade partners, China would feel the squeeze even more. On April 9, 2025, Trump raised the tariff on Chinese goods to 125% – bringing the total U.S. tariff on some Chinese imports to 145%.
The move, in Trump’s telling, was prompted by Beijing’s “lack of respect for global markets.” But the U.S. president may well have been smarting from Beijing’s apparent willingness to confront U.S. tariffs head on.
While many countries opted not to retaliate against Trump’s now-delayed reciprocal tariff hikes, instead favoring negotiation and dialogue, Beijing took a different tack. It responded with swift and firm countermeasures. On April 11, China dismissed Trump’s moves as a “joke” and raised its own tariff against the U.S. to 125%.
The two economies are now locked in an all-out, high-intensity trade standoff. And China is showing no signs of backing down.
And as an expert on U.S.-China relations, I wouldn’t expect China to. Unlike the first U.S.-China trade war during Trump’s initial term, when Beijing eagerly sought to negotiate with the U.S., China now holds far more leverage.
Indeed, Beijing believes it can inflict at least as much damage on the U.S. as vice versa, while at the same time expanding its global position.
A Changed Calculus for China
There’s no doubt that the consequences of tariffs are severe for China’s export-oriented manufacturers – especially those in the coastal regions producing furniture, clothing, toys and home appliances for American consumers.
But since Trump first launched a tariff increase on China in 2018, a number of underlying economic factors have significantly shifted Beijing’s calculus.
Crucially, the importance of the U.S. market to China’s export-driven economy has declined significantly. In 2018, at the start of the first trade war, U.S.-bound exports accounted for 19.8% of China’s total exports. In 2023, that figure had fallen to 12.8%. The tariffs may further prompt China to accelerate its “domestic demand expansion” strategy, unleashing the spending power of its consumers and strengthening its domestic economy.
And while China entered the 2018 trade war in a phase of strong economic growth, the current situation is quite different. Sluggish real estate markets, capital flight and Western “decoupling” have pushed the Chinese economy into a period of persistent slowdown.
