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With Tariffs Reaching 245% And Restrictions In Key Sectors, China And The US Intensify Economic Rivalry, Expanding Uncertainties And Impacts On Global Trade
The trade dispute between the United States and China has flared up again. The two largest economies in the world are involved in a new round of tariffs and threats, with direct impacts on businesses, consumers, and global markets.
Billion-Dollar Tariffs Pressure Both Sides
China’s exports to the United States now face tariffs of up to 245%. In response, Beijing has imposed fees of 125% on American imports.
The measures generate uncertainties and increase fears of a possible global recession. The Chinese government, led by Xi Jinping, says it is open to dialogue but has also made it clear that, if necessary, it will “fight to the end.”
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China’s Resilience Capacity
As the world’s second-largest economy, China is better positioned to withstand the effects of tariffs than smaller countries. The country has a massive internal market, with over a billion inhabitants.
This can ease pressure on exporters. To boost consumption, the Chinese government has adopted incentives such as subsidies for home appliances and travel packages aimed at retirees.
Expert Mary Lovely from the Peterson Institute told the BBC that the Chinese leadership may be willing to bear the costs of the trade war rather than yield to what it sees as American aggression.
Being an authoritarian regime, China also does not face the electoral pressure that often influences democratic governments.
Still, there are concerns about public discontent. The crisis in the real estate sector and job losses are already generating dissatisfaction.
The current economic uncertainty particularly affects young Chinese people. The Communist Party has turned to nationalism to sustain its confrontational strategy. In public statements, officials assure that “the sky will not fall.”
Strategic Investments For The Future
China has been heavily investing in technology. The goal is to move from being just the world’s factory to becoming a powerhouse in innovation.
The country invests in sectors such as artificial intelligence, chips, and renewable energy. The chatbot DeepSeek is an example of domestic technology that competes with Western rivals.
In the automotive sector, BYD has surpassed Tesla to become the world’s largest manufacturer of electric vehicles. Brands like Huawei and Vivo have also made strides into the market dominated by Apple.
Beijing announced it will invest over US$ 1 trillion in innovation in the coming years. Meanwhile, American companies trying to leave China are facing difficulties in replacing the country’s infrastructure and skilled labor. This strategic advantage in the supply chain has been built over decades.
China’s Responses After Trump 1.0
The first round of tariffs imposed by Donald Trump in 2018 served as a wake-up call for China. Since then, the country has accelerated projects like the “New Silk Road,” which strengthens partnerships with the Global South. China has also diversified its imports, especially of soybeans.
The United States once accounted for 40% of soybean exports to China. Today, that figure has dropped to about 20%. China has started to cultivate more domestically and is now buying record volumes from Brazil, its largest supplier.
Currently, the US is no longer the primary destination for Chinese exports. Southeast Asia has taken that position. In 2023, China was the largest trading partner of 60 countries, nearly double that of the US. By the end of 2024, the country recorded a record trade surplus of US$ 1 trillion.
Despite this, the United States remains an important partner. However, Washington’s ability to isolate China is commercially limited. Malaysia’s Trade Minister, Tengku Zafrul Aziz, recently stated: “We will never choose between China and the US.”
Trump’s Weakness: The Bond Market
In early April, Trump imposed broad tariffs, likening the measure to a “medicine.” However, after a sharp decline in the value of US Treasury bonds, he backed down and suspended the tariffs for 90 days.
Experts believe that China now understands that the financial market can influence Trump’s decisions.
China is the second-largest foreign holder of these bonds, with US$ 700 billion. The idea of selling part of them as a form of pressure has already been raised by Chinese state media. However, analysts warn that this would also bring losses for China itself, as well as destabilize the yuan.
According to Marina Yue Zhang, China “has a bargaining chip, not a financial weapon.” The use of US Treasury bonds as a pressure instrument has its limits.
The Card Of Rare Earths
One of Beijing’s strongest cards is its dominance over rare earths. These minerals are essential for the production of high-tech equipment. China controls about 61% of the extraction and 92% of the refining of these elements, according to the International Energy Agency.
Among the essential metals are dysprosium, used in electric vehicle magnets, and yttrium, which protects jet engines.
China has already restricted the export of seven of these metals in response to the new American tariffs. It has also banned the sale of antimony, used in various industrial sectors. The price of antimony has skyrocketed, doubling amid a rush for alternative sources.
Experts warn that a broader blockade could harm entire industries, from defense to electronics production. Thomas Kruemmer of Ginger International Trade and Investment summarized: “Everything you can turn on or off probably works with rare earths.”
Beijing Plays With Strategic Advantage
The trade war between China and the US shows no signs of abating. China’s firm stance, investments in technology, and control over strategic resources demonstrate that the country is prepared for a prolonged confrontation.
At the same time, the US attempt to weaken the Chinese economy faces concrete obstacles. The interdependence between the two countries remains deep. And pressure on US financial markets may force adjustments.
The balance of this dispute remains uncertain. But one thing is clear: China will not back down easily. And the entire world is watching the next chapters.
With information from the BBC.
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