TAIPEI, Taiwan — As US President Donald Trump launches a new trade war with China, analysts say he will face a much stronger and more prepared enemy in Beijing compared to his first term in office.
Since returning to the White House in January, Trump has already imposed a 20% tariff on Chinese imports.
Tariffs come in addition to previous obligations Trump and former US President Joe Biden placed on more than $400 million in Chinese products.
After denounced the latest US tariffs as “bullying” and “blackmailing,” Beijing announced tariffs of 10-15% last week on numerous US agricultural products, including corn, beef, pork, dairy products and soybeans.
The tariffs that came into effect on Monday followed Beijing’s announcement last month that it was a 10% tariff on crude oil, agricultural machinery, pickup trucks and some vehicles, and a 15% tariff on coal and liquefied natural gas.
“If war is what the US wants, whether it’s a tariff war, a trade war or another kind of war, we’re ready to fight to the end,” China’s Foreign Ministry spokesman Lin Jiang told reporters last week.
The TIT-for-TAT measure reminds us of Trump’s first trade war in 2018, but both Washington and Beijing face very different conditions than they did seven years ago.
According to analysts, the world’s two biggest economies have steadily separated in recent years, reducing interdependence and blunting the impact of tariffs.
Christopher Beddor, assistant China investigation director at Beijing-based Devidkal Dragonomics, said the latest tariffs should be “very manageable” for China, far below the 60% Trump threatened during the campaign.
“I don’t want to keep that impact modest. It’s big because it almost triples the effective tariff rate for Chinese goods coming to the US,” Beddor told Al Jazeera.
“But exports to the US to China are a rather modest share of its economy as a whole,” Beddor said.
Decrease in transaction distribution
According to Bloomberg, China’s total trade share (measured as the total exports and imports) fell from 15.7% to 10.9% between 2018 and 2024.
During the same period, the US share of China’s total trade fell from 13.7% to 11.2%.
Lin Song, the Chinese massive economist at ING, said it’s unlikely that Beijing will panic over tariffs, at least for now.
“It was desirable to avoid this kind of trade friction, but I’m not saying there’s a sense of panic because it’s planned,” Song told Al Jazeera.
“That being said, all tariff escalations inevitably have some trade, and it becomes impossible and some companies will be affected.”
Another factor that mitigates the impact of tariffs is that Chinese exporters such as Shein and Temu have discovered that they have managed to sell low-cost goods directly to their customers by taking advantage of the tariff exemptions they ship under $800.
Beijing is continuing to implement measures to isolate the economy from trade shocks.
At a “two session” meeting in Beijing last week, China’s highest national national conference announced several fiscal stimulus measures, including raising local government debt levels and issuing 1.3 trillion yuan ($17.9 billion) in long-term financial obligations.
Karsten Holtz, a Chinese economy expert at the Hong Kong University of Science and Technology, said Beijing’s domestic policy moves have given a huge buffer to US demand.
“Even the impact of a complete Trump ban on imports from China is hardly realistic in the age when, say, most iPhones are produced in China, but it may not be greater than a percentage point of China’s GDP,” Holz told Al Jazeera.
“For authoritarian leadership, determined to project strength, this would not be enough to participate in foreign invaders and what the Chinese people seem to be. ”
Some analysts believe Beijing wants to negotiate with Trump, at least for now, despite a stronger position compared to 2018.
“Avoid escalation”
One of the most powerful signals that Chinese officials are discussing is that their opening tariffs were relatively mild and limited to a limited number of products, suggesting a strategy to “avoid escalation.”
“Retaliation is not intended for China’s government to not put trade pressure on them, but they will also not feed on escalating trade disputes that could make early overreactions more difficult,” Pay told Al Jazeera.
“By instead applying medium tariffs to a short list of major industries, Beijing is increasing political pressure in Red State, the leading exporter of corn, soybeans, sorghum and other agricultural products, and they hope to bring Trump to the table.”
Beijing may be fishing for a “phase 2” deal along with the “phase 2” deal that attacked Trump in 2020 to end the first trade war with Trump, Pay said.
Under the Phase One Agreement, China has pledged to buy $200 million in US goods and services, including agricultural products, for two years.
However, according to the Peterson Institute of Economics, Beijing only met about 58% of this amount after trade derailed by the Covid-19 pandemic.
John Gong, a professor of economics at the International University of Business and Economics in Beijing, agreed that China could withstand pressure but was ready to negotiate.
“Of course, the Chinese government is worried, but will not retreat in a humiliating way. They want to negotiate a deal, but if they can’t, they will have a “so-called attitude,” Gong told Al Jazeera.
Meanwhile, some analysts believe Trump risks overestimating his hand.
During the last trade war, Trump focused solely on China, but has also turned his eyesight to other countries, including Mexico and Canada, to mitigate the US trade deficit.
The US president also moved at lightning speed.
For about a month, Trump deployed tariffs on $1.4 trillion worth of goods, according to an analysis by Erica York, vice president of the Federal Tax Foundation, a Washington-based think tank.
However, it is unclear how strict Trump’s tariffs will be.
Just two days after imposing sweep duties on Canada and Mexico on March 4, Trump announced he would delay many import duties until April 2.
“There are a lot of things that could be wrong for Trump right now. To be honest, the US domestic economic outcome is so bad that it’s reasonable that he will be forced to retreat from many of these tariffs.”
“[China’s] Here’s the approach: Wait and watch, apply more fiscal stimulus and reduce the impact. ”
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