Tariff War Offers Strategic Gains to China

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.

- LINGGONG KONG

While the rest of the world would be given a 90-day reprieve on additional duties beyond the new 10 percent tariffs on all U.S. trade partners, China would feel the squeeze even more. On April 9, Trump raised the tariff on Chinese goods to 125 percent—bringing the total U.S. tariff on some Chinese imports to 145 percent.

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 percent. 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. 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.