Despite the looming threat of economic hardship and potential global recession, China is signaling a firm stance, emphasizing its “economic resilience” and readiness to endure the tariffs.

The trade war between the United States and China has recently intensified, with tit-for-tat tariffs reaching unprecedented levels. While Washington has paused its sweeping “reciprocal” tariffs on most trading partners, it has doubled down on China, escalating levies to 125%. Beijing has responded in kind, raising tariffs on American goods to 84%.

“We are approaching a monumental train wreck breakup,” said Orville Schell, director of the Center on U.S.-China Relations at Asia Society in New York. “The fabric that we so carefully had woven together over the last several decades is ripping apart.”

The latest escalation follows President Donald Trump’s announcement of significant tariff increases, initially targeting many countries.

However, facing criticism from his own party and a sell-off in global markets, Trump swiftly reversed course on many of these tariffs, implementing a 90-day pause for nations willing to negotiate with the U.S.

Treasury Secretary Scott Bessent explained this move as a strategic maneuver, indicating that over 75 countries have already sought deals. “This was his strategy all along,” Bessent stated.

However, China is in a different position, facing an even steeper tariff burden. Trump increased levies on Chinese imports from 104% to 125%. This decision came after Beijing announced its retaliatory tariffs on U.S. goods.

Secretary Bessent attributed China’s increased tariffs to retaliatory actions: “Do not retaliate, and you will be rewarded.” Despite the heightened tensions, Trump expressed his expectation that the two countries would eventually reach an agreement.

China’s economic resilience

Unlike previous trade disputes, the current round of tariffs has galvanized a strong sense of resolve within China.

Many Chinese citizens and economists support Beijing’s firm response, viewing the U.S. actions as specifically targeting China regardless of its actions.

“Obviously, China is targeted. No matter what China does, the U.S. will find a way to hit [it]. There’s no point and no room for China to retreat.” Wu Lang, an executive in Shanghai, argued. He further criticized comments made by U.S. Vice President J.D. Vance, viewing them as demeaning to the hard work of the Chinese people.

A key theme emerging from China is emphasizing “economic resilience” as a strategic advantage in this protracted trade conflict. Zheng Yongnian, dean of the School of Public Policy at the Chinese University of Hong Kong’s Shenzhen campus, stated, “What China and the U.S. are competing for now is economic resilience… Our goal should be to build an industrial system with strong economic resilience; only in this way can we secure a dominant position in the long-term competition with the U.S.“

“Although China’s most urgent economic challenge remains internal, 125 percent U.S. tariffs give Beijing a clear pretext to act — to stimulate aggressively, subsidise strategically, sharpen its survival instinct and double down on technological supremacy,“ says Keyu Jin, author of ‘The New China Playbook: Beyond Socialism and Capitalism.’

This aligns with Jin’s sentiment, expressed last month in an Interview with EE Times: “Many in the West don’t understand China. Fundamentally, they don’t understand China’s philosophy, culture, and values.”

It suggests that China is prepared for a long-term endurance test, betting on its ability to weather economic pressures better than the U.S.

Domestic market offers a crucial buffer against tariffs

One potential advantage for China lies in its vast domestic market. As the trade war intensifies and the risk of completely decoupling from the U.S. grows, Chinese export industries may increasingly focus on catering to domestic demand.

Yao Yang, an economics professor at Peking University, acknowledged the difficulties posed by the trade war but also expressed confidence in the government’s ability to manage the situation. He suggested that redirecting products to the domestic market while potentially increasing competition provides a crucial buffer against external shocks.

Furthermore, the Chinese government has signaled its readiness to deploy economic tools to counter external pressures.

Premier Li Qiang stated that the government has prepared sufficient measures to address external economic shocks. While the impact on low-income groups remains a concern, there is a stated commitment to ensuring basic livelihoods.

Long-term vision

Beyond immediate economic concerns, some observers believe China is taking a long-term strategic view. The focus on building a resilient industrial system suggests an aim to secure a dominant position in the global economy, irrespective of the immediate outcomes of the trade war.

A Beijing banker noted that while some sectors might face short-term pain, “in the long run, it’s about the greater good.”

Apple looking to diversify manufacturing

In contrast, U.S. companies like Apple face significant challenges due to the tariffs and the uncertainty surrounding trade policy. Apple has seen a substantial drop in market value since the tariff announcements.

The company is exploring options to mitigate the impact, including increasing iPhone shipments from India to the U.S. However, shifting production away from China in the short term is not possible due to China’s profoundly entrenched supply chain. Reserving India’s entire iPhone output for the U.S. would still only cover a fraction of the iPhones shipped annually to the U.S.

American computer manufacturers looked at the world as “China versus non-China”. Since Trump’s tariffs, they see it as ‘U.S. versus the rest of the world’ point of view.

Experts consider the prospect of manufacturing computers and mobile devices in the U.S. “astronomically expensive” and “impractical” due to the complexity and cost of shifting the extensive Asian-based supply chain.

Erik Woodring, an analyst at Morgan Stanley, noted that Apple is “now seemingly looking at the prospect of being forced to change the entire way in which they think about building and pricing an iPhone.”

Global trade in flux

The U.S.-China trade war is also causing ripples across the global trade landscape. While the U.S. has paused tariffs on many countries, the unpredictability of future policy decisions creates uncertainty.

Some tech suppliers are already adjusting their strategies, with increased interest in countries like the Philippines that have lower tariff rates than others in Asia.

“A test of endurance is underway as Trump narrows the trade war focus on China,” said Lynn Song, chief economist for Greater China at ING. China appears ready for this test, betting that its capacity to absorb economic pain and its focus on long-term strategic goals will ultimately provide it with an advantage in this high-stakes trade conflict.

By: DocMemory
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