SHANGAI – A “day of liberation” for America, a day of anguish for China: Donald Trump’s sweeping new tariffs are hitting the People’s Republic harder than almost any other industrial power. “China firmly rejects the imposition of these tariff measures by the United States,” a spokesperson for the Foreign Ministry in Beijing said on Thursday. The Ministry of Commerce added, “These so-called reciprocal tariffs violate international trade rules, undermine the legitimate rights and interests of the parties concerned, and are a classic example of unilateral bullying.”
By Friday, China had already retaliated with an array of countermeasures, including additional tariffs of 34% on all U.S. goods and curbs on export of some rare earths. The Chinese finance ministry said the additional tariffs would be imposed from April 10.
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With a flat rate of 34%, China sits near the top of the affected countries. And these new tariffs are likely to pile on top of the 20% punitive tariffs that were slapped on shortly after Trump first took office. Back then, Trump justified the measures by pointing to China’s failure to cooperate in cracking down on the international fentanyl trade. This time, he claims China’s own tariffs on U.S. imports effectively amount to a 67% rate when you factor in currency manipulation and other trade barriers. Compared to that, he argues, America’s counter-tariffs are merely a “reduced reciprocal tariff.” That claim, however, is at least controversial.
Taken together, the U.S. tariffs on Chinese goods now total 54% and are inching closer to the 60% threshold Trump floated during the campaign. Including tariffs already imposed on certain Chinese imports under the Joe Biden administration, the rate on some goods could now exceed 70%.
For China’s already faltering economy, which had recently turned more toward exports amid weak domestic consumption, Trump’s tariff blitz amounts to a full-on frontal attack with consequences that are nearly impossible to predict. Some analysts are already estimating the fallout could shave one to two percentage points off China’s growth this year.
The U.S. offensive is also likely to make China’s trade tensions with the European Union even worse. As access to the American market tightens, Chinese companies will be under increasing pressure to unload their goods elsewhere — especially in Europe.
Fragile growth
But Brussels and several national governments in Europe have long bristled at the glut of industrial overcapacity China has been pumping into their markets. With local producers unable to match China’s prices, the flood of exports is accelerating Europe’s deindustrialization.
In response, the EU has already imposed punitive tariffs on certain Chinese goods, particularly electric vehicles. Trump’s tariff wave will likely pour more fuel on the fire.
“We will closely monitor any indirect effects these tariffs may have,” EU Commission President Ursula von der Leyen said on Wednesday. “We are not in a position to absorb global overcapacity, nor will we accept dumping in our markets.”
China strikes back
At the same time, China’s options for dodging U.S. tariffs are shrinking. And Friday’s retaliatory levies from Beijing leave little doubt of both sides digging in their heels in the duel of economic superpowers. Moreover, routes like indirect exports through Vietnam or Mexico, where many Chinese firms have relocated production in recent years, are becoming less attractive as the U.S. raises tariffs on those countries as well.
This is a fresh blow to Chinese e-commerce giants like Temu, Alibaba, and Shein
Adding to the pressure, Trump on Wednesday scrapped tariff exemptions for imports under the so-called de minimis rule, which had allowed foreign online retailers to ship goods worth less than 0 to American customers duty-free. This is a fresh blow to Chinese e-commerce giants like Temu, Alibaba, and Shein, who account for most of those low-value shipments.
The authorities in Beijing have plenty of reasons to be furious — and the leadership is clearly not taking Trump’s move lying down.
Worse-case scenario
China’s reaction to the fentanyl tariffs already showed it has a deep bench of tools for responding to economic coercion. Beyond the quick retaliation with counter-tariffs, it also announced export bans Fridays on critical raw materials like rare earths.
This could plunge the world’s two dominant powers into a dangerous spiral of escalation.
There is also the possibility of blocking investment and other forms of pressure on American companies doing business in China. According to reports from Bloomberg, China’s Central Economic Planning Administration has been ordered to withhold approvals for Chinese firms seeking to invest in the U.S. Devaluing the yuan against the dollar is also being discussed as a way to give Chinese exports a competitive edge.
Still, despite any retaliation, President Xi Jinping may have little choice but to sit down with Trump and ask for tariff relief. “China is willing to exchange views with the United States on key issues in the economic and trade relationship and to resolve mutual concerns through equal dialogue and consultation,” a spokesperson for the Ministry of Commerce said Thursday.
But any deal will be hard to reach. Trump has already vowed to slap on more tariffs if China responds with countermeasures. That would plunge the world’s two dominant powers into a dangerous spiral of escalation. Nationalist online pundit Hu Xijin has already taken to social media to argue that China should, instead, answer the tariffs with more military strength: “Our armed forces must ensure that the United States cannot bully our trading partners or box us into a corner.”
