Amid U.S. President Donald Trump’s global tariff offensive, China and the United States are locked in a cycle of trade retaliation, with both sides unwilling to be viewed as ceding ground.
On April 2, which he dubbed “Liberation Day,” Trump announced sweeping tariff hikes on most countries around the world, supposedly designed to bring U.S. trade barriers to “reciprocal” levels (although, as critics have pointed out, the simplistic formula being used seems to actually reflect the U.S. trade deficit with various countries instead). For China specifically, the April 2 announcement called for adding a 34 percent tariff – on top of two separate 10 percent tariff hikes in February, which Trump had linked to China’s role in the U.S. fentanyl crisis.
China responded to each of these escalations with a mirroring response: increasing its own tariffs on U.S. imports, adding U.S. firms to its Unreliable Entity List, and restricting exports of critical minerals. In response to the April 2 hike, China ramped up its response by slapping a 34 percent tariff on all U.S. exports to China – no longer limiting the damage to targeted sectors.
Trump was irate about China’s response and immediately threatened to levy an additional 50 percent tariff on Chinese goods. It wasn’t clear at first if this was a serious policy decision or Trump-esque bluster, but on April 8 – the day before the “reciprocal tariffs” took effect – the White House confirmed the new hike was happening.
“It was a mistake for China to retaliate,” White House Press Secretary Karoline Leavitt told reporters. “The president, when America is punched, he punches back harder. That’s why there will be 104 percent tariffs going into effect on China tonight at midnight.” (The 104 percent number comes from the total of all Trump’s separate tariff hikes: 10 percent, 10 percent, 34 percent, and 50 percent.)
Treasury Secretary Scott Bessent also told CNBC that it was a “big mistake” for China to retaliate against Trump’s tariffs.
The Trump administration was unlikely to be pleased, then, when China responded with yet another tariff hike of its own on April 9. China’s State Council announced that it was raising tariffs on all U.S. imports to 84 percent, matching Trump’s 50 percent escalation. Unintentionally echoing the Trump administration’s language, a statement from the Commerce Ministry said, “The U.S. threat to escalate tariffs on China is a mistake on top of a mistake.”
That gets at the root of the issue: both Washington and Beijing believe the other side is making a “mistake” by retaliating (instead of, presumably, folding and coming to the table for negotiations to end the trade war). That assumption is underpinned by each side’s confidence that their country is better positioned to weather the inevitable pain that will follow the tariff hikes.
“What do we lose by the Chinese raising tariffs on us?” Bessent said dismissively to CNBC. “We export one-fifth to them of what they export to us, so that is a losing hand for them.”
China’s policymakers, however, disagree. They are betting that the American public will refuse to tolerate sharp price hikes from tariffs – a logical assumption, considering Trump was elected largely based on dissatisfaction with inflation – as well as the U.S. stock market’s ongoing crash. Some CEOs have already dubbed the economic damage “the Trump recession.” Beijing seems willing to gamble that rising internal pressure will force Trump to back down without China having to make concessions.
There’s also the fact that Trump has essentially declared a trade war against the entire world, severely limiting U.S. alternatives to Chinese imports. China, which is fighting on a single front, has more options for diversifying its markets for both imports and exports – a possess that Beijing had already begun in earnest during the first Trump administration. But, experts warn, the rest of the world is unlikely to be willing to absorb the massive excess capacity that would be caused by a sharp dropoff on Chinese exports to the United States. Attempts to export more to the rest of the world could cause a domino effect of discontent in China’s other trade relationships.
Editor’s note: After this piece was published, Trump announced in a social media post that his administration would pause or reduce tariff hikes on all countries that had offered to negotiate, which is effectively all of the countries targeted except for China. He also announced he was upping the tariff rate on China to 125 percent.
“This was his strategy all along,” Bessent told reporters after the about-face, referring to the pause while negotiations progress and the singling out of China. “You might even say he goaded China into a bad position – they have shown themselves to the world to be the bad actors.”
Beyond the economics, there’s also a psychological dimension to the trade war that is fueling the escalation cycle. Unlike other countries that have shown a willingness to negotiate with Trump – like Vietnam, Japan, and India – China is locked in a global rivalry with the United States. Each side views the other with extreme suspicion, and that makes any compromise unlikely. Instead, both the United States and China have accused each other of bullying behavior, adding a emotive component to the trade war that will make it exceedingly difficult for either Trump or Xi Jinping to back down.
“China firmly rejects and will never accept such hegemonic and bullying move,” said Lin Jian, China’s Foreign Ministry spokesperson, in a regular press conference on April 9. “…If the U.S. decides not to care about the interests of the U.S. itself, China and the rest of the world, and is determined to fight a tariff and trade war, China’s response will continue to the end.”
Bessent called China “the worst offenders in the international trading system.”
Already, both Beijing and Washington have indicated that they will wait for the other side to come begging to start negotiations.
“If the U.S. really seeks to resolve the issue through dialogue and negotiation, it should demonstrate an attitude of equality, respect and reciprocity,” Lin said.
Meanwhile, Leavitt had told reporters on April 8 that China would have to be the one to start talks to end the tariffs. “The president also wanted me to tell all of you that if China reaches out to make a deal, he’ll be incredibly gracious, but he’s going to do what’s best for the American people,” she said, adding, “China has to call first.”
For now, instead of trying to negotiate, China is taking steps to bolster its economy internally. According to Reuters, top Chinese policymakers – including senior officials from the State Council, the People’s Bank of China, and the banking and securities regulators – were expected to hold an urgent meeting this week “to hammer out measures to boost the economy and stabilize capital markets.”
