The decision by the head of the People’s Republic of China, Xi Jinping, to quickly take countermeasures against the United States in the area of trade after US President Donald Trump last week announced reciprocal tariffs on goods imported from the Asian country indicates Beijing’s readiness for a large-scale, intense and, in a sense, fundamental economic confrontation with Washington.
It is worth noting that the trade war between the mentioned countries that have the largest economic systems in the world will have global consequences. This does not imply a trade confrontation with a limited scale of impact. In the era of globalization, which, according to many experts, may come to an end in the foreseeable future or be significantly transformed against the background of Washington’s new tariff policy, economic processes in different regions of the world are closely interrelated and, accordingly, certain changes in one of the sectors of this space have something that corresponds to such a concept as a ripple effect.
Over the past few weeks, China has been taking measures and making certain efforts in the format of attempts aimed at forming a dialogue with the United States, according to media reports. Beijing sought to reach an agreement with Washington on the normalization of economic cooperation, but at the same time, the Asian country made statements about its readiness to worsen the global situation and to act in the conditions and circumstances of a new configuration of reality. For example, Chinese Premier Li Qiang said last month that China is ready for possible unexpected shocks. Donald Trump has repeatedly spoken about striving to reach a deal with Beijing, but nevertheless in the first days of April announced reciprocal tariffs, which largely affected the Asian country. There is still a theoretical possibility of a dialogue between China and the United States, and the subsequent stabilization of economic cooperation, but the situation in the practical plane reduces the realism of the relevant perspective.
On Friday, April 4, Beijing demonstrated a stringent approach to the gradually emerging trade war. Beijing has announced blanket tariffs against Washington and tightened export controls. Also, in this case, it is significant that on Monday, April 7, the official newspaper of the Chinese authorities published an article stating that the Asian country no longer perceives through the prism of optimistic illusions the prospects of concluding a deal with the United States. At the same time, the statement that Beijing, despite the escalation of the trade war, leaves a door open to negotiations has become relatively symptomatic. This thesis reflects a large-scale objective reality in which the Asian country is a strong economic space, including in the production aspect of the corresponding formulation, but still not powerful enough to dispense with significant reliance on export activities or to immerse oneself in the autonomy of one’s existence without significant damage that worsens future prospects. Despite swift and harsh countermeasures, Beijing, declaring its readiness to negotiate a deal to normalize economic ties with Washington, signals that it is aware that its power is not infinite and unlimited, and needs active external cooperation. China, by sending a message through the state media about the rejection of illusions, in a symbolic sense hints at the unwillingness to become like a person who, under the impact of exalted fantasies based on a semi-inadequate or completely inadequate perception and understanding of reality, begins to play a superhero, increasingly believing in the truthfulness of the invented image and forgetting about the limits of own physical capabilities and the inevitable susceptibility to death in all senses and manifestations. In general, this is an adequate position, which does not mean that Beijing is weak. China has considerable power, but it is not omnipotent. Each country has a certain margin of safety, which is more of an economic concept. In the context of the incipient trade war, which demonstrates a tendency to escalate, it is the margin of safety that determines the prospects of the state system in terms of its ability to cope with harsh realities.
China’s rapid reaction to Donald Trump’s reciprocal tariffs has been a shock factor for the markets, where new volatility has formed. Beijing on Friday announced 34% tariffs on goods imported from the United States. Before that, Donald Trump announced levies of a similar size against products shipped from an Asian country.
Currently, investors adhere to such a concept of perception of the present global economic reality, which provides for the virtual inevitability of a protracted trade war with deep destructive consequences, probably of a fundamental nature. The corresponding sentiment intensified after last Sunday, April 6, when Donald Trump announced that he did not intend to strike deals to reduce tariffs unless the relevant agreements would contribute to eliminating trade deficits with specific countries. This rhetoric clearly complicates the prospects that Beijing and Washington will be able to normalize economic ties.
Wu Xinbo, director at Fudan University’s Center for American Studies in Shanghai, commenting on China’s position against the background of the conditions and circumstances of the emerging trade war, said that the Asian country believes that before sitting down to negotiate, it is necessary to engage in battle since the other side wants to do it first. As part of the discussion about the prospects of a telephone conversation between Xi Jinping and Donald Trump, the expert noted in the framework of the emotional and symbolic manner of expressing thoughts that the head of the People’s Republic of China is not going to just call and beg pardon to the one who slapped his face.
Stocks are showing a significant drop amid actively circulating and increasing concerns about the potential impact of a trade war on the global economy. For Asian markets, Monday was the worst day since 2008. A gauge of Chinese shares listed in Hong Kong fell into a bear market. The city’s benchmark Hang Seng Index showed a drop, which turned out to be the largest since 1997. Europe’s Stoxx 600 was down more than 6% at one point. S&P 500 futures indicated more turmoil for American markets.
Relationships between China and the United States have been steadily deteriorating in recent years. The current situation does not contain any relatively objective reasons for improvement or even fragile hopes for it. Donald Trump has not spoken with Xi Jinping since his return to the White House. This is the longest period in the last 20 years when the President of the United States did not speak with his Chinese counterpart after the inauguration.
Craig Singleton, a senior fellow at the non-partisan Foundation for Defense of Democracies, believes that Donald Trump and Xi Jinping are locked in a paradox of pressure and pride. It was noted that in this case, the head of the People’s Republic of China faces a dilemma, which is that if he refuses to engage, the pressure will increase, but too early engagement can be interpreted as a sign of weakness.
It is worth noting that the current reality for Beijing is unfavorable not only in the context of the already formed or emerging state of affairs but also in terms of the prospects for the subsequent transformation of the system of conditions and circumstances. In this case, it implies numerous media warnings about the high probability of the next rounds of US tariff increases on imports of Chinese goods. A decrease in the volume of bilateral trade between an Asian country and the United States against the background of mutual tariff measures is no longer a potential prospect and belongs to the category of what will inevitably happen. Against this backdrop, Beijing ramps up efforts to bolster the domestic economy, which is the second-largest in the world. The media published information according to which last week Chinese policymakers huddled to discuss plans for stimulus to accelerate domestic consumer activity. As the external economic reality becomes less favorable, Xi Jinping is betting more and more on the vast consumer base of the Asian country. As noted by the media, as part of the current efforts, he strives to absorb manufacturing output.
It is worth noting that experts have repeatedly said that against the background of the evident negative impact of US tariffs on the condition of the world’s second-largest economy, Beijing is likely to accelerate measures to stimulate domestic consumer activity.
It is obvious that Xi Jinping is currently facing non-trivial challenges. He needs to demonstrate the strength of the Chinese economy. This need is largely political. Also, the results of the reaction to the mentioned challenges in terms of consequences will be multi-vector. Achieving certain positive effects in this area will demonstrate to Chinese residents that their country has the potential and can cope with the troubles emanating from the external geopolitical space, which will mean additional points for Xi Jinping, among other things, in the context of public support. Moreover, favorable results will signal to the United States about the opponent’s ability to economically exist under the sign of an upward dynamic in the face of tariff pressure. Also, this factor could potentially be interpreted by other countries faced with Donald Trump’s reciprocal tariffs as meaning that China is at least to a moderate extent an alternative world economic center, or at least has arguments to claim the appropriate status. Such an opinion may prompt some world capitals to cooperate more closely with Beijing. The benefits for China, in this case, are obvious, especially in the context of the need to diversify external partnerships in the context of the degradation of the usual system of global economic interaction, the symbolic breathing of which is becoming increasingly difficult in the historical air of the new day, filled with elements of protectionism.
It is worth noting that over the weekend, several major world banks, including UBS Group AG and Morgan Stanley, made alarming forward-looking statements about the potential consequences of the fastest growth in US tariffs in a century. They warn that these measures could be a very painful blow to the economy. Bank’s experts note that tariffs can put significant pressure on the growth of the Chinese economy in the current year. According to media reports, experts currently believe that the gross domestic product (GDP) of the Asian country will increase by 4% in 2025. At the same time, Beijing’s economic target is about 5%.
The prospects for a further escalation of the trade war are becoming more realistic every day. After Sunday’s statement, Donald Trump issued a new economic threat against China on Monday. On the Truth Social virtual platform, he posted a message stating that the United States is to impose an additional 50% tariff, effective April 9th, on the Asian country if Beijing does not lift its retaliatory levies. Donald Trump also said that all talks with China concerning the requested meetings with the US would be terminated in the specified case. Last week, he called Beijing’s decision to take countermeasures against Washington a mistake.
China has the tools to respond to the escalation of the trade war by the United States. Some of these tools have already been used, but there is still room for further scaling of the relevant actions. The weakening of the yuan is one of the potential ways to offset the impact of tariffs on the Chinese economy. The Asian country may also tighten export controls on critical minerals. Moreover, in this case, there is likely to be increased pressure on US companies operating in China.
It is worth noting that the Asian country has already imposed curbs on exports of rare earths. The corresponding action could potentially have global consequences. In this case, a threat is emerging to the world’s supply of major materials used in high-tech manufacturing, including in the production of electric vehicles and weapons.
Last week, Beijing announced that it would tighten export controls on seven types of rare earths. China is currently the largest supplier of minerals, which comprise 17 elements in the periodic table.
On Monday, related stocks have grown against the backdrop of the mentioned Asian country’s decisions. The value of China Rare Earth Holdings Ltd. stocks in Hong Kong showed an increase of as much as 10%. Shares of China Northern Rare Earth Group rose by 9.2%.
Data from the US Geological Survey shows that the Asian country accounts for almost 70% of the global production of rare earths. Some experts characterize this circumstance as a potential geopolitical weapon of China. In the relevant context, it is worth mentioning the significant dependence of the United States on shipments of rare earths. Over the past two years, Beijing has already imposed export restrictions on certain critical minerals such as gallium, germanium, graphite, and antimony. These measures were taken by the Asian country against the background of growing tensions in global trade, which were observed even before Donald Trump’s tariffs but had a more moderate configuration of existence compared to the current situation.
Beijing’s recent export control decisions do not provide for a complete ban on shipments, but they do mean that any overseas exports will be subject to closer scrutiny of who is buying and why. The list of rare earths announced last week includes samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. At the same time, two of the most common, including neodymium and praseodymium, were not affected by the new control measures. These metals are used in powerful magnets.
David Abraham, an affiliated professor at Boise State University in Idaho, noted that neodymium and praseodymium are more available outside of China, which is why any control measures will be less impactful.
The China Nonferrous Metals Industry Association said last week that export control measures against rare earths would not harm the stability of the international supply chain. It was also noted that these measures will not affect the business and trade of companies that do not harm the national sovereignty, security, and development interests of the Asian country.
Moreover, last week China’s commerce ministry stated that establishing control over dual-use items with military applications is in the interests of national security, regional stability, and world peace.
At the same time, diplomacy continues to be a kind of option in the context of countering the negative impact of tariffs on the Asian country. In this case, it means strengthening ties with other states. It is worth clarifying that the corresponding option does not imply interaction with the United States, although the negotiations between Beijing and Washington have still not become something out of the category of fiction, despite the escalation of economic confrontation and new threats from Donald Trump.
The Asian country is gradually starting to use the mentioned option. In this context, it is worth mentioning that last month, officials from Japan, South Korea, and China jointly called for open and fair trade. During a visit to Brussels, Chinese Vice Finance Minister Liao Min expressed a willingness to work with the European Union to defend the multilateral trading system. The Chinese Embassy in Ottawa has made similar statements about its partnership with Canada.
China, having the second-largest economy in the world and one of the largest markets, is a profitable arena for cooperation in terms of other states’ interests. Donald Trump’s reciprocal tariffs have affected almost all countries of the world. The European Union and Canada have an obvious pragmatic interest in closer cooperation with China, but it is still unknown whether this will become a platform for deepening partnership.
Xi Jinping will pay a visit to Southeast Asia this month. This visit will be of particular importance against the background of the virtually imminent likelihood that Beijing will begin to form new lines of cooperation in the foreign economic arena to offset the consequences of deteriorating cooperation with Washington. According to media reports, it is highly likely that China will initially monitor how countries such as Cambodia, Vietnam, and Malaysia will act as part of negotiations with the United States on tariff reductions. It is important for Beijing to make sure that the mentioned actions do not generate such results in the practical plane that will contradict its interests. If China concludes that the conjuncture of potential cooperation with Cambodia, Vietnam, and Malaysia is favorable, it will probably develop partnerships with the specified countries.
Lee Sue-Ann, senior fellow at the ISEAS-Yusof Ishak Institute, said that what may be tougher for Beijing to manage would be the knock-on protective measures other economies will take to shield their industries from an expected flood of cheaper Chinese goods as demand in the US and other key markets tighten.
The escalation of the trade war is obvious, and the Asian country is demonstrating a tough approach in the context of its readiness to actively respond to this state of affairs, but there is one important nuance. China, despite its strict rhetoric, still does not adhere to the concept of extremely radical measures. This means that Beijing is not seeking a complete cessation of cooperation with Washington. China is ready for a prolonged confrontation and does not intend to deviate from its interests, but it does not cancel the opportunity for dialogue.
Henry Gao, a law professor at Singapore Management University who researches Chinese trade policies, said the Asian country wants to convey to the United States that it is not intimidated and is willing to stand its ground. It was noted that in this case, the goal is probably not to inflict significant damage, but to exert pressure and encourage dialogue.
The People’s Bank of China is also taking actions that indicate its preparations for a long trade war, which contains the potential for further escalation. The Asian country’s financial regulator added gold to its reserves for a fifth straight month in March. China’s central bank has deepened its bid for the mentioned precious metal as a haven asset amid intensifying trade and geopolitical tensions.
Beijing has already experienced one trade war with the United States. In this case, it means the situation that was observed during the first presidential term of Donald Trump. At that time, there was also an economic confrontation between China and the United States. According to media reports, Beijing has learned from the mentioned experience, and for this reason, it has a significant level of confidence in its ability to cope with the challenges associated with a new trade war. Journalists published information according to which, after the confrontation with the United States during the first presidential term of Donald Trump, China expanded its network of trading partners. In this case, Beijing’s dependence on Washington has decreased both in exports and imports. At the same time, it is worth noting separately that the mentioned decline was not wide-ranging.
Last year, the United States accounted for less than 15% of Chinese exports. In 2017, the corresponding figure was recorded at the 19% mark. It is worth clarifying that this reading was observed before the start of the trade war during the first presidential term of Donald Trump. Trade routed through third countries likely made up for some of the shortfall.
Shipments of goods from the United States to China also declined. At the same time, it is worth noting that trade volumes in this direction have always been relatively small. These imports have become less critical for China, which means reduced vulnerability to the realities generated by the trade war.
In the context of the Asian country’s efforts to diversify imports, agricultural products are a representative example. In this case, among other things, it is worth mentioning China’s desire to reduce reliance on US soybeans. In the past, American exporters dominated the Asian country’s market. In 2024, their share in the mentioned market was 20%. This is because China ramped up purchases of soybeans from Brazil.
The results of efforts to diversify the directions of economic partnership have formed a kind of safety margin for the Asian country, which will allow it to maintain its position, despite various rhetorical and practical threats, until Washington assesses the circumstances as appropriate for the start of negotiations. At the same time, it is possible that both sides of the confrontation will adhere to a tough approach for so long that the escalation of the trade war will cause either irreparable or difficult-to-compensate economic damage. From the point of view of pragmatic interests, Washington and Beijing are not interested in this, but their focus on drastic practical readiness for measures and countermeasures may provoke the materialization of an undesirable scenario.
Wang Yiwei, a professor of international relations at Renmin University and a former Chinese diplomat, suggested that the Asian country expects Donald Trump’s efforts in the context of the trade war to run out of momentum soon.
Politics, including in the context of economic issues, is a space of actions performed by people. This means the importance of the psychological component. In the relevant context, it is worth noting that sometimes the willingness to wage war before the outbreak of hostilities, not only in the literal physical sense, is nothing more than rhetoric. Threatening statements can disappear when specific actions need to be taken. Bravery in a warm home is different from bravery on the battlefield. Whether this thesis is relevant to the positions of the United States and China in the context of the trade war will become known over time.
