China’s response to Donald Trump’s trade war, particularly following his “Declaration of Economic Independence” on April 2, 2025, and the imposition of a 34% tariff on Chinese goods (effective April 9, 2025, atop an existing 20% rate), is shaping up as a calculated mix of retaliation, resilience, and strategic adaptation.
Key Takeaways
- US President Donald Trump has imposed a 34% tariff increase on Chinese imports, which, when combined with previous tariffs, could result in an effective US tariff rate on China of around 65-70%.
- The new tariffs are expected to significantly impact China’s economy, potentially subtracting up to 2.5 percentage points from its growth, and putting pressure on Chinese policymakers to meet their GDP growth target.
- China has expressed firm opposition to the new tariffs and plans to take countermeasures, while analysts predict a protracted negotiation process between the two countries, with potential for further escalation before a resolution is reached.
Immediate Retaliatory Measures
China has already signaled a firm stance against Trump’s tariffs, with the Ministry of Commerce vowing on April 3, 2025, to “resolutely take countermeasures to safeguard its own rights and interests.” Early actions suggest a tit-for-tat approach, though initially restrained to preserve negotiation room.
Following the February 4, 2025, 10% tariff hike, China imposed 15% tariffs on U.S. coal, LNG, and agricultural products like soybeans and cotton, alongside an antitrust probe into Google. With the new 34% tariff, expect an expansion of these measures—potentially targeting up to $20 billion more in U.S. exports, such as meats, grains, and industrial goods, while avoiding an all-out escalation that could destabilize its own economy.
Posts on state media, like Foreign Ministry spokesperson Lin Jian’s March 5 declaration that China will “fight till the end,” underscore this readiness to retaliate, though the scale will likely be calibrated to signal resolve without closing diplomatic doors.
Economic Resilience and Strategic Diversification: Insights from Trump’s First-Term Trade Policies
Learning from Trump’s first-term trade war, China has been diversifying its trade relationships to reduce reliance on the U.S. market, which now accounts for less than 15% of its exports (down from 19% in 2017). Since 2024, exports to the EU, ASEAN, and Latin America have surged—e.g., a 20% increase to Vietnam and Mexico—helping offset potential U.S. losses. The tariffs, while painful (potentially cutting $100 billion from China’s $439 billion in U.S. exports last year), won’t cripple its $18 trillion economy, as exports to the U.S. are only about 3% of GDP
Beijing is also pushing domestic consumption, with plans for increased fiscal stimulus—think more debt issuance and monetary easing—announced at the March 2025 Two Sessions, though it’s holding bigger measures in reserve for a worst-case scenario.
Strategic Leverage and Negotiation
China’s leadership, under Xi Jinping, appears open to dialogue despite the hawkish rhetoric. Vice Premier He Lifeng’s March 26 call with U.S. Trade Representative Jamieson Greer expressed “serious concerns” but also hinted at a preference for “equal dialogue.” Beijing might offer concessions—like ramping up purchases of U.S. goods (e.g., pork or energy) or cracking down on fentanyl precursors—to ease tensions, a tactic used in the 2020 Phase One deal.
However, unlike Canada and Mexico, which secured tariff delays via direct talks, Xi has avoided a personal call with Trump, signaling a shift from first-term tactics. Analysts suggest China is waiting for Trump’s April 1 trade review recommendations to gauge whether to escalate or negotiate, possibly aiming for a summit by June 2025.
Long-Term Strategies for Adaptation and Relocation in Southeast Asia
China’s toolkit extends beyond tariffs. It’s tightening export controls on dual-use items (e.g., gallium, germanium) critical to U.S. tech and defense sectors, a move that could pinch American supply chains. Meanwhile, firms like BYD are accelerating overseas production—its Thailand plant could dodge some U.S. tariffs—while others shift to Southeast Asia, though Trump’s 46% Vietnam tariff complicates this. Domestically, Beijing is doubling down on self-reliance, boosting subsidies for tech and manufacturing to counter onshoring pressures that could see U.S. factories repatriate jobs.
The Trump administration’s decision to end preferential treatment for goods valued at $800 or less also deals a blow to millions of Chinese e-commerce suppliers. Some analysts warn that the tariffs could exacerbate strains in China’s domestic economy, leading to a rise in problem loans for banks.
China’s response isn’t without risks
Retaliation could invite further U.S. escalation—Trump’s threatened 60% rate looms large—while overproduction and price wars in alternative markets might fuel deflation, a concern for its exporters. The yuan’s weakening (down 0.5% since April 2) softens the tariff blow but could unsettle investors if it accelerates. Politically, Xi must balance economic stability with nationalist pride, avoiding the perception of bowing to “bullying,” as state media calls it.
In short, China will hit back with targeted tariffs and trade restrictions, lean on its diversified markets and domestic stimulus, and keep the door cracked for talks—all while bracing for a prolonged standoff. The trade war’s next phase hinges on Trump’s moves post-April 9 and whether Beijing’s restraint holds if losses mount.
China’s strategy will also involve strengthening ties with alternative trading partners, investing in technological self-reliance, and leveraging global forums to counterbalance U.S. influence. Meanwhile, Washington may face increasing pressure from domestic industries and consumers as tariffs ripple through the economy. The trajectory of this conflict will likely shape global trade dynamics for years to come, with both nations vying for economic supremacy amidst mounting uncertainty.
