Welcome to the 255th edition of Trade War.
China’s ability to “eat bitterness,” means it’s unlikely to concede first in the US-China trade war. Beijing calls Washington’s tariffs of 145% a “joke” even as it raises its counter levies to 125%. And there still is room for both sides to step back from the brink, I tell NBC Montana.
Did Trump just blink with his decision to give smart phones, computers, and chips a tariff exemption? The tariffs on China are “the most regressive tax in US history that shafts the [American] working class,” says inequality expert and NYU professor Nouriel Roubini.
China is on a charm offensive with its neighbors as Xi Jinping prepares to visit Vietnam, Malaysia, and Cambodia. Beijing tells hedge funds to limit daily stock sales to stabilize markets. And tariffs could shave 2.4 percentage points off China’s economic growth.
Notable/In depth ~
Chinese economic elites unusual in that many hail from a rural background
Beijing expands limits on rare earth exports
China’s is leveraging its scale to overtake the US, argue Kurt M. Campbell and Rush Doshi in Foreign Affairs
China ready to ‘eat bitterness’ - what about the US?
China’s ability to endure hardship during difficult time means its unlikely to concede first in the tariff standoff with the U.S., I write in China is ready to ‘eat bitterness’ in the trade war. What about the US?, for the New Atlanticist.
US President Donald Trump’s tariff blitz has morphed into a US-China trade war, with tariffs exceeding 10 percent on most countries now given a ninety-day reprieve while those on China are hiked to a dizzying 145 percent, following Beijing upping its levies on the United States to 84 percent. [Now raised to 125 percent.] So what’s likely to come next? Well, for one, the White House appears to have badly miscalculated in thinking China’s leaders “want to make a deal” and would rush to the negotiating table.
“The US threat to escalate tariffs on China is a mistake on top of a mistake and once again exposes the blackmailing nature of the US,” China’s commerce ministry said on Tuesday. “China will never accept this. If the US insists on its own way, China will fight to the end.”
Almost exactly one year ago, in discussions I had in Beijing on the prospect of a US-China trade war under a future US president, officials repeatedly mentioned a secret weapon they held ready to wield: the ability of China and its people to “eat bitterness” or chiku.
What does that mean? Chiku is regularly raised by Chinese to describe their ability to endure hardships during difficult times, including in service of a supposed greater national goal. During the Mao Zedong era it was on display during the Great Leap Forward, the horrendously misguided policy that aimed to see China surpass the United Kingdom in steel production and that ultimately led to famine. More recently, this attitude was seen during China’s national campaign to stop the spread of COVID-19. And the fact is not lost on the authoritarian leaders in Beijing that the Trump administration will have to deal with growing pushback from the American people if, as expected, the trade war leads to inflation and job losses, while China will likely face less public pressure.
In a sign of how seriously China is taking the prospect of a trade war, an official compared China’s resolve—albeit indirectly—to that shown during armed conflict. On April 9, Liu Pengyu, spokesperson for the Chinese embassy in Washington, shared a video of Chinese President Xi Jinping solemnly saying that “intimidation or pressure will never work on the Chinese nation,” a clip from a speech that Xi gave in 2020 on the occasion of the seventieth anniversary of China’s entry into the Korean War (official Chinese name: “The War to Resist US Aggression and Aid Korea”).
Another reason Beijing is unlikely to come rushing to Washington with concessions: Many Chinese officials share a strong belief that they are engaged in an existential struggle with the United States, with both countries vying for economic, political, and military supremacy. While that contest began years ago, they see the trade war as the latest iteration and believe that any concessions would be inevitably met with more pressure. To give in to US demands, they seem to believe, would likely undermine Xi’s carefully constructed reputation as a forceful global leader, which is important for his standing both at home and abroad.
China has been preparing for this conflict for a long time, including by diversifying its trade away from the West. Chinese exports to the United States account for 14.7 percent of China’s total in 2024, down from 19.2 percent in 2018, while overseas shipments to Southeast Asian and Belt-and-Road countries have grown, according to Beijing. Overall, about 30 percent of China’s exports last year went to Group of Seven (G7) wealthy countries, down from 48 percent in 2000, says San Francisco-based Matthews Asia. At the same time, China’s share of global exports actually has grown by a percentage point, to 14 percent, since Trump’s first term.
Beijing too has strategically lessened its reliance on important commodities from the United States, such as soybeans, the majority of which are now bought from Brazil, and it has pushed for greater food self-reliance. “We have been engaged in a trade war with the US for eight years and have accumulated rich experience in this struggle,” the official mouthpiece newspaper People’s Daily said in a front-page commentary on Monday. “We have not closed the door to negotiations, but we will not take chances either. Instead, we have made all kinds of preparations to deal with shocks.”
In recent days, Beijing has strategically targeted industries such as agriculture that are located largely in Trump-supporting red states, with new tariffs on wheat, beef, pork, and soybeans. And it has slapped restrictions on the export of more rare-earth minerals, which are used to manufacture everything from smartphones and automobiles to advanced semiconductor chips and anti-ballistic missile systems. At the same time, China has added a host of new US companies, including drone maker Skydio, to its export control list, expanded its unreliable entities list, and strengthened its anti-foreign sanctions law—all part of a growing toolkit for economic retaliation. Meanwhile, US firms that are deeply reliant on China for global sourcing, such as Walmart, have been called in and warned to not exert pressure on Chinese suppliers to cut prices, while China’s state planning agency has told Chinese firms to delay any planned investments in the United States.
Finally, Beijing may see an abrupt decoupling from the United States as unpleasant, but it also fits in with China’s long-term goal of rebalancing its economy toward one that is far more reliant on domestic consumption, an objective stressed repeatedly at the annual “two sessions” legislative meetings in March.
“In the face of high tariffs that continue to shrink the trade space with the US, we must take expanding domestic demand as a long-term strategy, strive to make consumption the main driving force and ballast of economic growth, and give play to the advantages of our large market,” said the People’s Daily in its commentary.
With Beijing digging in, the question for Washington becomes: How much bitterness are Americans prepared to swallow in return?
Trump tariffs a ‘joke’ and ‘numbers game’
Beijing called Trump’s China tariffs now at 145 percent a “joke” on Thursday even as it raised its counter levies to 125 percent, saying it won’t go higher.
“Given that American goods are no longer marketable in China under the current tariff rates, if the U.S. further raises tariffs on Chinese exports, China will disregard such measures,” China’s Ministry of Finance said in a statement (Chinese).
In a separate statement (Chinese), the Commerce Ministry described the sharp rise in U.S. tariffs as “a numbers game” with “no practical significance in economics.” It shows the “bullying and coercion” of Washington and has “become a joke,” the ministry added.
China’s top leader Xi Jinping on Friday said China is unafraid of any “unjustified suppression,” in his first public comments on the tariffs.
“One that goes against the world risks being isolated themselves,” Xi said to the visiting Spanish Prime Minister Pedro Sanchez.
“Prior to 2025, the average import taxes charged by each side on the other were less than 20 percent, even after the first trade war in Trump’s previous term in office,” reports Bloomberg News.
“The US and China now trade about $700 billion worth of goods each year . . . Last year, the top U.S. imports from China included smartphones, laptops, and lithium-ion batteries. On the flip side, some of the biggest U.S. exports to China were liquid petroleum gas, oil, soybeans, gas turbines and machines used to produce semiconductors.”
Last trade war never ended for China
“People in China really feel like they can ‘eat bitterness,’” I say in an interview. “That plays into their tough stance. I think they believe that, ultimately, if anyone’s gonna blink, it’ll be the U.S.”
“Roberts adds that, at least from Beijing’s perspective, the first trade war never really ended. The Biden administration kept Trump’s earlier tariffs on Chinese goods in place. Biden also imposed his own tariffs, like a 100 percent tariff on Chinese EVs, and—perhaps more annoyingly to Beijing—targeted China’s tech sector with measures like exports bans of U.S. chips,” Fortune reported Saturday.
“That means Beijing has been on a ‘trade war footing’ since 2016. China has built trade relationships with other markets, found new sources to replace U.S. commodities, and invested in its own technology companies.”
“China has been preparing for a world with less access to the U.S. market for a number of years now,” says Yeling Tan, a professor of public policy at Oxford University.
“Way for both sides to declare … victory”
The likelihood of both sides coming together for a deal that sees at least some of the tariffs unwound is still relatively high.
“One of the reasons the economic relationship has been so large is that there are complementary parts to the U.S.-China relationship. China needs agriculture and food, and the U.S. is a massive producer of those. The U.S. makes airplanes, and China wants airplanes. China makes great smartphones and laptops—these are things that have a huge market in the U.S. Some of our biggest multinational companies, like Apple, are deeply reliant on China as both a market for their products and as a key part of their global supply chain,” I say in an interview with NBC Montana.
“I think it's likely that in the coming months, we’ll see a scenario where both sides find some way to step back. Both can declare victory and say they didn’t blink first. Neither side wants to give in first. China keeps saying it doesn’t want to be bullied. Trump says they’ve shafted us in so many ways, and they have to come to the table. I do think there’s a way for both sides to declare their own version of victory and step back from a lot of these tariffs. Part of the reason, I think, is because the economic pain for both sides—and frankly, for the world—is so high if they don’t.”
Watch the video and read the transcript of the full interview with NBC Montana.
Phones, computers, and chips win exemption
Did Trump just blink with his decision to exempt smart phones, computers, chips, and other technology devices from most of the tariffs?
Keep reading with a 7-day free trial
Subscribe to Trade War to keep reading this post and get 7 days of free access to the full post archives.