The US-China trade escalation has no end in sight. Here’s why Beijing’s not backing down

The US-China trade escalation has no end in sight. Why Beijing is not resigning itself: China is the sole focus of what was supposed to be a historic, era-defining trade war started by US President Donald Trump against a variety of nations. Trump announced a three-month pause Wednesday on all the “reciprocal” tariffs that had gone into effect hours earlier – with one exception, deepening a confrontation set to dismantle trade between the world’s two largest economies. Then on Thursday, Beijing made good on its vow to bring in its own retaliatory tariffs.
The pace of that escalation has been stunning. Trump’s tariffs on Chinese imports have increased from 54% to 104% and now to 125% in a week. These increases add to the levies that were already in place prior to the president’s second term. In addition, China has retaliated in kind by raising additional, retaliatory duties on all US imports to 84%. This confrontation ushers in a historic break that will not only hurt the economies of these two countries that are so closely linked together, but it will also add a lot of friction to their geopolitical rivalry. “This is probably the strongest indication we’ve seen pushing towards a hard decoupling,” said Nick Marro, principal economist for Asia at the Economist Intelligence Unit, referring to an outcome where the two economies have virtually no trade or mutual investment.“ It’s really hard to overstate the expected shocks this is going to have, not just to the Chinese economy itself, but also to the entire global trading landscape,” as well as on the US, he said.
Trump appeared to link his decision not to grant China the same reprieve as other nations to Beijing’s swift retaliation, telling reporters Wednesday that “China wants to make a deal, they just don’t know how quite to go about it.”
But the view from Beijing looks dramatically different.
Chinese leader Xi Jinping, China’s most powerful leader in decades, sees no option for his country to simply capitulate to what it calls America’s “unilateral bullying.” And he’s playing to the crowd. As part of a strategy it has been quietly preparing for more than four years since Trump’s last administration, Beijing has publicly cultivated fervent nationalism around its retaliation. While China has long said it wants to talk, Trump’s rapid escalation instead appears to have confirmed for Beijing that the US doesn’t. And in Xi’s calculation, observers say, China is prepared not just to fight back, but to use Trump’s trade turmoil to strengthen its own position.
“Xi has been very clear for a very long time that he expects China will enter a period of protracted struggle with the United States and its allies, that China needed to prepare for that, and they have quite extensively,” said Jacob Gunter, lead economy analyst at Berlin-based think tank MERICS.
“Xi Jinping has accepted that the gauntlet is thrown down, and they are ready to put up a fight.”
“Battle of Attrition” Whether Trump would have suspended his so-called retaliatory tariffs on China alongside other nations had Beijing not moved so swiftly to retaliate remains an open question. Canada had retaliated but was included in the reprieve, which does not remove a 10% universal tariff imposed last week.
Regardless, Trump, whose “spine of steel” the White House referred to earlier this week, and Xi appear to be locked in a war of attrition that has the potential to disrupt a trade relationship that is lopsided but highly integrated and is worth approximately half a trillion dollars. China has been the world’s factory floor for decades, producing everything from shoes and household goods to electronics, raw materials for construction, appliances, and solar panels through increasingly automated and high-tech production chains. Shipping containers are seen at a port in Nanjing, in eastern China’s Jiangsu province on April 8, 2025.
Related piece After Trump’s additional tariffs go into effect, China promises to take “resolute and effective measures.” Those factories met the needs of consumers all over the world for affordable goods, but they also contributed to a huge trade deficit and the perception among some Americans, including Trump, that globalization has taken jobs and manufacturing out of the United States. Some estimates suggest that China’s exports to the United States could be cut by more than half in the coming years as a result of Trump’s increase in tariffs to well over 125 percent. Many goods from China won’t be able to be quickly replaced – driving up US consumer prices, potentially for years, before new factories come online. That could ring up a tax hike for Americans of roughly $860 billion before substitutions, JP Morgan analysts said Wednesday.
In China, a wide swath of suppliers are likely to see their already narrow margins completely erased, with a new wave of efforts to establish factories in other countries set to begin.
Victor Shih, director of the University of California, San Diego’s 21st Century China Center, claims that the scope of the tariffs could result in “millions of people becoming unemployed” and a “wave of bankruptcy” throughout China. Meanwhile, US exports to China could “go close to zero,” he added.
“But China can sustain that (situation) much more so than American politicians can,” he said.
That’s, in part, because China’s ruling Communist Party leaders do not face swift feedback from voters and opinions polls.
“They shut down the economy during Covid, which caused untold employment and suffering – no problem,” Beijing is also confident that it can withstand the storm. “In response to US tariffs, we are prepared and have strategies. A commentary that appeared on the front page of the Communist Party mouthpiece People’s Daily on Monday stated, “We have accumulated rich experience in these struggles, having engaged in a trade war with the US for eight years.” It said that Beijing could make “extraordinary efforts” to increase domestic consumption, which has been low for a long time, and implement other economic policy measures. The commentary stated, “The plans to respond are well-prepared and ample.” And in the face of unknowns about how much further measures could escalate, voices from Beijing appear calm.
In a state media op-ed earlier this week, economist Cai Tongjuan of China’s Renmin University wrote, “The ultimate outcome hinges on who can withstand a longer ‘economic war of attrition.'” “And it is evident that China has a greater strategic endurance advantage.” In recent weeks, Beijing has also spoken to nations from Europe to Southeast Asia in an effort to expand trade cooperation and outpace the United States by winning over American allies and partners who are frustrated by the on-and-off trade war. However, since Trump’s first trade war and his campaign against Huawei, China has been prepared for US trade frictions. These events served as a wake-up call to Beijing that its economic rise could be derailed if it wasn’t prepared. Shih in California said, “The Chinese government have been preparing for this day for six years – they knew this was a possibility.” He added that Beijing had supported countries to diversify supply chains and looked to manage some of its domestic economic challenges in preparation. Stock market information at the Nasdaq MarketSite in New York, US, on Wednesday, April 9, 2025.
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Today, China is much better placed to weather a broader trade conflict, experts say. It has expanded its trade relations with the rest of the world in comparison to 2018, reducing the proportion of US exports to less than 15%, down from roughly one fifth of its total. In order to take advantage of lower US duties, its manufacturers have also established extensive operations in third countries like Vietnam and Cambodia. China has also built out its supply chains for rare earths and other critical minerals, upgraded its manufacturing technology with AI and humanoid robots and ramped up its advanced technology capabilities, including semiconductors. Since last year, the government has also worked, with varying success, to address issues like weak consumption and high local government debt.
“(China’s) weaknesses are significant, but in the context of an all-out brawl, these are manageable. The US is not going to be able to, on its own, bring China’s economy to the edge of destruction,” said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies think tank in the US.
“They have a point when they say you can’t contain China economically, even though Washington doesn’t want to admit it.”