Trump Escalates Trade War with China: Goods Tariffs Rise to 125%

Donald Trump’s decision to back down on his plan to levy strong tariffs on global trade partners did not extend to China. Instead of the 90-day delay offered to other nations on additional tariffs beyond the newly instituted 10%, China was subjected to even more stringent measures. On April 9, 2025, Trump escalated the trade war by increasing the duty on Chinese goods to 125%, leading to an aggregated U.S. tariff of 145% on some Chinese items. According to Trump, this act was triggered by China’s absence of reverence for global markets.

One potential reason for this could be China’s expressly defiant stance of confronting the U.S. tariffs directly, diverging from the diplomatic approach of negotiation adopted by many nations. China swiftly put forth retaliatory measures in answer to these duties. Just two days later, on April 11, China derided Trump’s tariffs as a farcical act and reciprocated with a 125% tariff on U.S goods. This has resulted in a high-stakes impasse in trade relations between the two economic powerhouses with China showing no intention of stepping down.

Currently, China seems to wield more bargaining power, with the conviction they could potentially inflict equal or more damage on the U.S while concurrently expanding its global influence. The repercussions of tariffs are indeed harsh for China’s export-oriented manufacturing sectors, particularly those producing furniture, clothing, toys, and appliances predominantly for the U.S market. However, numerous underlying economic shifts since the 2018 onset of tariff increases by Trump have altered Beijing’s perspective substantially.

Of paramount importance here is the diminishing ideological supremacy of the U.S. market in the context of China’s export-centric economic structure. Back in 2018, during the first trade conflict, Chinese exports geared towards the U.S accounted for 19.8% of China’s aggregate exports. However, this figure shrank to 12.8% by 2023. The imposition of further tariffs may spur China to expedite the application of its ‘domestic demand expansion’ strategy which could empower its domestic consumer market and fortify its internal economy.

Contrary to the robust economic growth phase when China was drawn into the 2018 trade war, circumstances are remarkably different now. Slumping real estate markets, capital exodus, and the Western strategy of economic ‘decoupling’ have nudged the Chinese economy into a prolonged phase of deceleration. Ironically, this persistent downturn could have inadvertently bolstered the resilience of the Chinese economy to sudden economic jolts. This adverse situation has prompted enterprising solutions from businesses and policymakers who had to grapple with this harsh reality even prior to the imposition of Trump’s tariffs.

The tariff policy of Trump against China also offers Beijing a convenient pretext for justifying the economic slowdown to its citizens, thereby redirecting the blame towards U.S. antagonism. The Chinese leadership is well aware that the U.S. finds it challenging to break away from its dependence on Chinese supplies, particularly through its intricate network of supply chains. Even though direct U.S. imports from China have been curbed, goods sourced from other countries are significantly constituted by Chinese components or raw materials.

As per data from 2022, the U.S. depended on China for 532 key product categories which is nearly quadruple the figure from the year 2000. In the same period, China was successful in halving its reliance on U.S. products. Consequently, rising tariffs are estimated to inflate prices, potentially causing discontent among U.S. consumers, specifically among working-class constituents – a scenario that Beijing believes could be used as a counter-strategy against Trump’s tariffs by potentially pushing the U.S. economy towards a recession.

China also enjoys an upper hand through its possession of strategic resources and retaliatory tools at its disposal against the U.S. It is the dominant player in the global supply chain of rare earths, elements that are of paramount importance to military and high-tech industries. China, by some estimates, fulfils roughly 72% of U.S. demand for rare earth imports. Back on March 4, China subjected 15 American entities to export restrictions, consisting mainly of U.S. defense contractors or high-tech companies that are reliant on rare earths for their products.

China also has the capacity to target vital U.S. agricultural exports like soybeans and poultry, industries significantly dependent on Chinese demand and heavily concentrated in Republican-favoring states. China accounts for about half of the U.S. soybean exports and close to 10% of American poultry exports. On March 4, it rescinded import permissions for three prominent U.S. soybean exporters. Further, many of the U.S. tech firms still have firm ties to Chinese manufacturing. Tariffs could tremendously reduce their profitability margins, a fact that Beijing believes can be exercised as leverage against the U.S. administration.

China perceives that it can endure Trump’s expansive tariffs on a bilateral level, but moreover, views the U.S. widespread action against various trading partners as a once-in-a-generation strategic chance to displace American dominance. This geopolitical shift could dramatically alter the East Asian geopolitical landscape. As early as March 30, following Trump’s initial tariff increase on Beijing, China, Japan, and South Korea convened their first economic dialogue in half a decade and pledged to advance a tripartite free trade agreement.

Trump’s hefty duties on Southeast Asian countries could push these states towards establishing closer ties with China. On April 11, China planned state visits for President Xi Jinping to Vietnam, Malaysia, and Cambodia from April 14 to April 18, with the aim of bolstering ‘all-round cooperation’ with these neighboring nations. Notably, these Southeast Asian countries were all targeted with reciprocal tariffs by the Trump administration.

On a larger geographic scale, Trump’s tariff strategy has influenced China and the European Union to consider enhancing their somewhat strained trade relationships. An illustrative instance of this occurred on April 8, when the European Commission’s president conversed with China’s premiere. The two leaders unanimously criticized U.S. trade protectionism and endorsed free and open trade. Remarkably, on the same day that China raised its U.S. tariffs to 84%, the EU also commenced its first sequence of retaliatory measures.

Among the most significant strategic opportunities originating from Trump’s tariff policy for China is the potential weakening of the global stature of the U.S. dollar. The widespread imposition of tariffs on multiple nations has splintered investors’ confidence in the U.S. economy, leading to a depreciation in the value of the dollar. Traditionally, the dollar and U.S. Treasury securities were viewed as safe harbor assets, but current market turbulence has put a question mark over their status.

Rising tariffs have also amplified concerns about the health of the U.S economy and the viability of its debt, thereby undermining trust in both the dollar and U.S. Treasurys. While Trump’s tariffs will predictably harm particular sectors of the Chinese economy, Beijing asserts that this time, it is far better equipped.

Beijing believes it has the capacity to significantly hurt U.S. interests, but more crucially, Trump’s all-encompassing tariff initiative is seen as a rare and extraordinary strategic opportunity for China. Therefore, even if the tariffs initiated by Trump will inevitably impact sectors of China’s economy, the belief is that Beijing holds more significant cards this round.