Why China is Less Concerned About Trump’s Trade War Than in 2018 | Trade War Updates

Taipei, Taiwan – As United States President Donald Trump initiates a new trade war with China, analysts suggest he will encounter a stronger and more prepared adversary in Beijing compared to his first term in office.

Since returning to the White House in January, Trump has already imposed a 20 percent tariff on Chinese imports, citing Beijing’s alleged failure to curb the export of the deadly opioid fentanyl to the US.

This new tariff adds to previous duties imposed by both Trump and former US President Joe Biden on over $400 billion worth of Chinese goods.

After labeling the latest US tariffs as “bullying” and “intimidation,” Beijing retaliated last week by announcing tariffs of 10-15 percent on various US agricultural products, including corn, beef, pork, dairy, and soybeans.

These tariffs, which took effect on Monday, followed Beijing’s previous announcement of a 10 percent tariff on crude oil, agricultural machinery, pick-up trucks, and some cars, as well as a 15 percent tariff on coal and liquefied natural gas.

“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,” Chinese Foreign Ministry Spokesperson Lin Jiang told reporters last week.

While these tit-for-tat measures resemble Trump’s first trade war in 2018, both Washington and Beijing now face very different conditions than they did seven years ago.

Over the past few years, the world’s two largest economies have steadily decoupled, reducing their mutual dependency and lessening the impact of tariffs, according to analysts.

Christopher Beddor, Deputy China Research Director at the Beijing-based Gavekal Dragonomics, noted that the latest tariffs should be “pretty manageable” for China, especially since they are significantly lower than the 60 percent rate Trump threatened during his election campaign.

“I don’t want to understate the impact – that’s almost a tripling of the effective tariff rates for Chinese goods entering the United States, so it’s big,” Beddor told Al Jazeera. “But Chinese exports to the United States are a pretty modest share of its overall economy.”

Declining Trade Share

China’s share of total US trade – measured as the sum of exports and imports – dropped from 15.7 percent to 10.9 percent between 2018 and 2024, according to Bloomberg.

Similarly, the US’s share of China’s total trade fell from 13.7 percent to 11.2 percent over the same period.

Lynn Song, Chief Economist for Greater China at ING, stated that Beijing is unlikely to panic over the tariffs – at least for now.

“While avoiding this sort of trade friction would’ve been preferable, it’s something that’s been planned for, so I wouldn’t say there’s a feeling of panic,” Song told Al Jazeera. “However, with every tariff escalation, there will inevitably be parts of trade that become unviable and companies that are impacted.”

Another factor mitigating the impact of tariffs, Song explained, is that Chinese exporters like Shein and Temu have successfully sold low-cost goods directly to US customers by leveraging a tariff exemption on shipments valued at less than $800.

Beijing has also introduced measures to protect its economy from trade shocks.

During the recent “Two Sessions” meetings in Beijing, the National People’s Congress – China’s highest body of state power – announced several fiscal stimulus measures, including raising the debt level for local governments and issuing 1.3 trillion yuan ($179 billion) in long-term treasury bonds.

Carsten Holz, an expert on the Chinese economy at the Hong Kong University of Science and Technology, said Beijing’s domestic policies have provided a significant buffer against US demands.

“Even the effect of a complete Trump ban on imports from China – hardly realistic in an age when, for example, the bulk of iPhones are produced in China – may not make a dent larger than a fraction of a percentage point in China’s GDP,” Holz told Al Jazeera. “For an authoritarian leadership determined to project strength, this is unlikely to be enough to join what may look to the Chinese public like ‘peace talks’ with a foreign aggressor.”

Some analysts believe that despite its stronger position compared to 2018, Beijing is still willing to negotiate with Trump – at least for now.

‘Avoiding Escalation’

One of the strongest signals that Chinese officials are open to talks is that their initial round of tariffs was relatively mild and targeted a limited number of goods, suggesting a strategy of “avoiding escalation,” said Even Rogers Pay, a food and agricultural analyst at the Beijing-based research group Trivium China.

“The retaliation demonstrates that while China’s government doesn’t intend to take trade pressure lying down, they are also not going to be baited into an escalatory trade conflict where early overreaction could make striking a deal more difficult,” Pay told Al Jazeera. “By applying moderate tariffs to a short list of key industries, Beijing is ramping up political pressure in the red states that are major exporters of corn, soybeans, sorghum, and other farm products, hoping to bring Trump to the table.”

Pay suggested that Beijing may be aiming for a “phase two” deal similar to the “phase one” agreement reached with Trump in 2020, which ended the first trade war.

Under the phase one deal, China pledged to purchase $200 billion in US goods and services, including agricultural products, over two years. However, Beijing only fulfilled about 58 percent of this commitment after the COVID-19 pandemic disrupted trade, according to the Peterson Institute for Economic Research.

John Gong, a professor of economics at the University of International Business and Economics in Beijing, agreed that China can withstand the pressure but is also prepared to negotiate.

“The government in China is, of course, worried, but won’t back down in a humiliating way. They would love to negotiate a deal, but if they can’t, they would adopt a ‘so-be-it’ attitude,” Gong told Al Jazeera.

Meanwhile, some analysts believe Trump is at risk of overplaying his hand.

During the last trade war, Trump focused solely on China, but since returning to office, he has also targeted other countries, including Mexico and Canada, in an effort to reduce the US trade deficit.

Trump has moved quickly, rolling out tariffs on goods worth $1.4 trillion in about a month, compared to tariffs on imports worth $380 billion in 2018 and 2019, according to an analysis by Erica York, the vice president of federal tax policy at the Tax Foundation, a Washington-based think tank.

It remains unclear, however, how long Trump’s tariffs will remain in place.

Just two days after imposing sweeping tariffs on Canada and Mexico on March 4, Trump announced that he would delay duties on many imports until April 2.

“There are a lot of things that could go wrong for Trump now, and to be honest, there’s a reasonable possibility that he is forced to retreat from a lot of these tariffs because the domestic economic consequences for the US could be severe,” Gavekal Dragonomics’ Beddor said. “[China’s] approach is: let’s wait and see, and apply more fiscal stimulus to mitigate the impact.”