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

Taipei, Taiwan – As U.S. President Donald Trump reignites a trade war with China, analysts suggest he is now confronting a much stronger and better-prepared Beijing compared to his first term in office.

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

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

After condemning the latest U.S. tariffs as “bullying” and “intimidation,” Beijing retaliated last week by announcing tariffs of 10–15 percent on numerous U.S. agricultural products, including corn, beef, pork, dairy, and soybeans.

These tariffs, which took effect on Monday, followed Beijing’s announcement last month 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 U.S. wants, be it a tariff war, a trade war, or any other type of war, we’re ready to fight till the end,” said Chinese Foreign Ministry Spokesperson Lin Jiang last week.

While the tit-for-tat measures echo Trump’s first trade war in 2018, both Washington and Beijing find themselves in very different circumstances today compared to seven years ago.

The world’s two largest economies have steadily decoupled in recent years, reducing their mutual dependence and lessening the impact of tariffs, analysts note.

Christopher Beddor, deputy China research director at Beijing-based Gavekal Dragonomics, said the latest tariffs should be “pretty manageable” for China, especially since they are significantly lower than the 60 percent rate Trump had threatened during his 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 make up a modest share of its overall economy.”

Declining Trade Share

China’s share of total U.S. trade – measured as the sum of exports and imports – fell from 15.7 percent to 10.9 percent between 2018 and 2024, according to Bloomberg. During the same period, the U.S.’s share of China’s total trade dropped from 13.7 percent to 11.2 percent.

Lynn Song, chief economist for Greater China at ING, said 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. “With that said, with every tariff escalation, there inevitably will be parts of trade that become unviable and companies that will be impacted.”

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

Beijing has consistently rolled out measures to shield its economy from trade shocks.

At last week’s “Two Sessions” meetings in Beijing, the National People’s Congress – China’s highest state authority – announced fiscal stimulus measures, including raising the debt ceiling 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 policy initiatives provide a significant buffer against U.S. pressure.

“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 still seeks to negotiate with Trump – at least for now.

‘Avoiding Escalation’

One of the strongest signals that Chinese officials are open to dialogue is the relatively mild nature of their initial tariffs, which targeted a limited number of goods, suggesting a strategy of “avoiding escalation,” said Even Rogers Pay, a food and agricultural analyst at 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. “Instead, 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 that they hope will bring Trump to the table.”

Beijing may be seeking a “phase two” deal similar to the “phase one” agreement reached with Trump in 2020 to end the first trade war, Pay said. Under the phase one deal, China pledged to purchase $200 billion worth of U.S. 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 remains open to negotiations.

“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 it can’t, they would have a ‘so-be it attitude,’” Gong told Al Jazeera.

Meanwhile, some analysts believe Trump risks 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 U.S. trade deficit.

The U.S. president has moved rapidly. In just over a month, Trump imposed tariffs on goods worth $1.4 trillion, compared to tariffs on $380 billion worth of imports in 2018 and 2019, according to an analysis by Erica York, vice president of federal tax policy at the Tax Foundation, a Washington-based think tank.

It remains unclear 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 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 some reasonable possibility that he is forced to retreat from a lot of these tariffs because the domestic economic consequences for the U.S. are just so bad,” said Gavekal Dragonomics’ Beddor. “[China’s] approach is: let’s wait and see, apply more fiscal stimulus to mitigate the impact.”