Donald Trump is back in the White(Fight) House, and so is his most reliable economic weapon: tariffs, particularly focused on China. The latest round, a 20% levy on Chinese imports, has sent Beijing scrambling for a response.
Driving the news
Donald Trump has reignited the US-China trade war with a fresh round of tariffs, raising duties on Chinese imports to 20%—citing national security concerns and China’s role in the fentanyl crisis. Beijing responded swiftly with retaliatory tariffs, increased military spending, and a warning from its foreign ministry:
“If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”
As expected, the tit-for-tat measures have sent shockwaves through global markets, raising fears of a prolonged economic conflict that could reshape international trade for years to come. Trump, emboldened by his re-election and Republican control of Congress, believes he has the leverage to force China into submission.
Why it matters
This is more than just an economic dispute—it’s a battle for global supremacy. Trump’s aggressive stance aims to dismantle a trade system that he argues has unfairly benefited China for decades.
Meanwhile, Chinese President Xi Jinping is desperately trying to prevent his country from suffering the kind of economic and geopolitical isolation that doomed the Soviet Union during the Cold War, a Wall Street Journal report said.
It isn’t just trade. The competing agendas of the leaders of the world’s two largest economies are poised to lead to precisely what China is trying to avoid: a superpower clash not seen since the Cold War, an all-encompassing rivalry over economic, technological and overall geopolitical supremacy.
An article in the WSJ
While both nations have engaged in trade skirmishes before, this time, the stakes are even higher. Trump is pursuing a multi-pronged strategy that not only involves tariffs but also export controls, investment restrictions, and efforts to strengthen US trade ties with other nations to isolate China economically.
China’s countermeasures
Xi would like to believe that China is better prepared this time.
As expected, Beijing is preparing a mix of short-term and long-term strategies to counter the US offensive. In the immediate term, it has announced retaliatory tariffs of 10–15% on key US imports, while also stepping up its push to develop self-sufficiency in technology and energy production.
China is also working to strengthen its economic ties with non-Western nations. It has ramped up trade agreements with countries in Southeast Asia, the Middle East, and Africa, aiming to reduce its reliance on the US market. Additionally, Beijing is lobbying major US corporations—many of which rely on Chinese manufacturing—to push back against Trump’s tariffs, the WSJ report said.
Is China really ready for a trade war against US?
On the face of it, China seems much prepared this time. However, unlike the last trade war during the first term of Trump, China’s economic position has weakened. Years of pandemic-related disruptions, a crumbling real estate sector, and declining foreign investment have left the country more vulnerable to external shocks. Its post-pandemic recovery has been sluggish, and domestic demand remains weak. Xi’s economic team has tried to counterbalance this with state-driven investments, but growth remains fragile.
Interestingly, one lesson Xi has learned from the first trade war with Trump is that China has more to lose from hitting back with reciprocal tariffs. The US buys far more from China than the other way around, meaning China’s ability to hurt the US economy through tariffs alone is limited. Instead, Beijing is exploring alternative retaliatory measures, such as restricting exports of critical minerals that are essential for US technology industries.
While Chinese leaders may threaten retaliation, their real priority is shoring up economic stability rather than engaging in an all-out trade war.
What they’re saying
- Trump’s trade advisers: “The US can no longer afford to let China dictate global trade rules. We are reclaiming our economic independence.”
- Michael Pillsbury, China expert: “They are kind of desperate. Their economy is in trouble. Now that Trump put the tariffs on, they know this campaign [to avoid them] has failed.”
- Chinese officials: “Xi believes that must be avoided,” said a person who consults Beijing, referring to the risk of Soviet-style isolation.
- US defense secretary
Pete Hegseth : “Those who long for peace must prepare for war. We are strengthening our military to deter China’s aggression.”
Trump’s strategy
Even though Trump may be the one who currently looks isolated on the world stage—picking trade fights with erstwhile allies like Mexico and Canada, alarming Europe over his handling of the war in Ukraine and vowing to annex Greenland and the Panama Canal—the truth is that China doesn’t hold a strong hand.
An article in the WSJ
Trump’s trade policy is designed not just to counter China but to rewire the global trading system. His administration believes the US has been disproportionately harmed by free trade agreements that allowed China to flood the market with cheap exports while restricting foreign access to its own economy.
The latest tariffs are part of a broader effort to force China into making structural changes to its economy. Trump has also pushed Mexico and Vietnam—both key US trading partners—to crack down on Chinese firms that try to circumvent tariffs by routing their exports through third countries. His trade team is negotiating separate deals with other nations to strengthen US economic alliances before engaging directly with Beijing.
“All the stuff he’s doing is so that we can put more resources to counter China,” an administration official said.
US leverage play
- Trump is not stopping at tariffs. His administration is weighing additional measures to tighten restrictions on Chinese investment in the US, limit US companies’ business operations in China, and impose stricter export controls on high-tech goods.
- Trump’s team also sees an opportunity to reshape global trade by striking deals with other nations before negotiating with China. The US has been in talks with Mexico, Vietnam, and India to strengthen trade relations and prevent China from using third countries as a backdoor into the US market.
- The stakes extend beyond trade. Washington’s push to decouple key industries from China, restrict technology transfers, and rally partners against Beijing’s economic practices suggests a long-term strategy of containment. If successful, these moves could erode China’s ability to sustain high-growth levels, advance its technological ambitions, and project power internationally.
Between the lines
- Trump’s trade war is as much about politics as it is about economics. He is betting that his tough stance on China will rally his base, reinforcing his image as a fighter against unfair trade practices.
- For China, the challenge is existential. Xi Jinping is determined to avoid the fate of the Soviet Union, which collapsed under economic pressure from the US and its allies. That means China is likely to double down on efforts to insulate itself from US influence—whether through technological self-sufficiency, expanded trade partnerships, or military posturing.
- The bottom line: The US-China trade war is entering a new, more intense phase. Trump believes he has the upper hand and is willing to let China “stew” in economic distress until it concedes to US demands, the WSJ report said.
(With inputs from agencies)