China is among the biggest targets of Donald Trump’s tariffs, with a 34 per cent tariff due to come into force today, on top of a 20 per cent levy already imposed. Beijing’s response has been tougher than any in the world, slapping a 34 per cent tariff on all imports from the United States along with a raft of other measures. And in turn Trump has responded by threatening a further 50 per cent tariff on China.
China’s approach is in sharp contrast with that of other Asian countries, some of which face even steeper tariffs. Most have ruled out any retaliatory action, instead offering concessions.
The size of China’s economy and its position at the heart of many manufacturing supply chains leave it in a stronger negotiating position with the US than any other country in the world. But the severity of its response also reflects Beijing’s failure to make any progress in resetting the bilateral relationship with Washington since Trump returned to the White House.
China has diversified its export market in recent years so that while the US remains its biggest market, its share of Chinese exports has fallen substantially. And its manufacturers are so dominant in some sectors, that American retailers will struggle to find alternatives in the short term.
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China’s response to the US tariffs included filing a complaint under the World Trade Organisation’s (WTO) mechanism. This reflects China’s wish to present itself as a champion of the multilateral, rules-based trading system.
Beijing would like to build a closer economic relationship with the EU, perhaps reviving the Comprehensive Agreement on Investment that Brussels put on ice in 2021. But the EU and its member-states remain wary, fearing that their markets will now be targeted more than ever by Chinese exporters.
Many countries, including some in the EU, are hoping that market turmoil will generate enough domestic political pressure for Trump to change course. Beijing is putting the alternative strategy to the test by taking the fight to Trump and preparing to face the consequences.
