Will China surrender to US in tariff war? Donald Trump, US are more vulnerable because...

Will China surrender to the US in a tariff war, launched by President Donald Trump under his policies of America First and Make America Great Again? The tariff war that began with the Trump administration imposing a tariff of 10% on February 1, kept on scaling. The increase in tariffs was followed by another 10% on March 4. By April 2, U.S. tariffs reached 54%, China’s retaliated and imposed a tariff of 34% tariffs on the U.S. goods. Trump took further action and raised U.S. tariffs to 125% on April 9, later hitting 145%. China matched with 125% tariffs on April 11. It has become practically impossible for both of the countries to continue bilateral trade. 

How will tariff war impact US, China?

Experts have estimated that the increased tariffs may cost an average US citizen $1,300, the US GDP growth rate may come down by 0.2% and the Chinese GDP growth is most likely to drop by 0.7%. Beijing may register an economic growth of 4% in FY 2025. On the other hand, global trade could see a 0.2% loss in merchandise trade and the world economy may slip into recession. 

Is China prepared for trade war?

Earlier, China reduced bilateral trade and slashed its exports to the US from 19.8% of total exports in 2018 to 12.8% in 2023. It has also diversified its trade and increased the sourcing of commodities like soybeans from Brazil. Besides, it resorted to non-tariff barriers like an export ban on rare earth minerals critical to U.S. industries. Beijing also targeted the U.S. agricultural sectors in Trump-supporting states. Coming under scathing criticism from friends and allies, Donald Trump signaled flexibility and ordered exemptions for consumer electronics to mitigate domestic price hikes.

Xi Jinping shows defiance, refuses to blink

Instead of showing any sign of surrender to the US dictates, Chinese President Xi Jinping exhibited defiance and declared that his country is not "not afraid", and it will "fight to the end". Trying to whip up Chinese nationalism, he invoked the cultural concept of "eating bitterness", meaning enduring hardship. Foreign Ministry spokesperson Mao Ning shared a video of former Chinese leader Mao Zedong from 1953 during the Korean War. Taking to X, she shared a video on the social media platform where she wrote, "We are Chinese. We are not afraid of provocations. We don't back down."

Will China be more aggressive?

If the trade war escalates, China has other weapons in its arsenal. It holds U.S. Treasury bonds worth $760 billion. If it sells these bonds, the US dollar will be hit hard and may get devalued like never before. However, it may harm its own economy, as the import costs will go up and the yuan will be strengthened. Beijing also has the leverage of controlling the rare earth minerals and supply chains for electronics and pharmaceuticals.

Will Beijing have last laugh?

President Jinping's recent visit to the states of Vietnam, Malaysia, and Cambodia proves his willingness to strengthen ties with the neighbouring countries. Besides, in an attempt to actively counter U.S. isolation, China has plans to improve ties with the EU, Southeast Asia, and other regions. 

Beijing will certainly have an upper hand in the trade war considering its authoritarian system, strategic preparations, and global outreach. On the other hand, Donald Trump will come under democratic pressures and consumer reliance on Chinese goods, making Washington more vulnerable.