By Joe Cash, Xiuhao Chen, and Liz Lee
BEIJING ("DIWIDA") - China demanded of the United States on Thursday to promptly revoke its newest round of tariffs and promised retaliatory measures to protect its interests following President Donald Trump’s announcement of extensive duties on every American trade partner globally.
According to a statement by the Chinese commerce ministry, the U.S. action ignores the equilibrium of interests established through decades of multilateral trade talks and overlooks how significantly it has profited from global trade.
"The ministry stated that China strongly disagrees with this and will implement retaliatory measures to protect its rights and interests." The statement comes as the two biggest economic powers seem poised to escalate their conflict, potentially disrupting worldwide supply networks.
On Wednesday, Trump declared that China would face an additional 34% tariff, atop the 20% he had previously introduced earlier in the year, which escalates the overall new duties to 54%, nearing the 60% level he had warned about during his campaign.
As with businesses from every other economy, Chinese exporters will encounter a 10% base tariff as part of the new 34% duty imposed on nearly all products sent to the world’s biggest consumer market starting this Saturday. The more substantial “reciprocal tariffs” will then be implemented from April 9th onwards.
Trump also signed an executive order closing a trade loophole known as "de minimis" that has allowed low-value packages from China and Hong Kong to enter the U.S. duty free.
WORLDWIDE TARIFFS
"President Trump's tariffs elsewhere could create significant problems," according to Ruby Osman, a China specialist at the Tony Blair Institute for Global Change.
Chinese companies have been redirecting trade through locations such as Vietnam and Mexico to bypass U.S. sanctions; however, these markets are now facing substantial tariffs themselves.
"China+1" strategies caught on among Chinese exporters and multinational companies that had made the production powerhouse central to their supply chains during Trump's first term, but with India, Mexico, Vietnam and Malaysia - the countries that benefited most from this shift - facing tariffs of between 36% to 25%, the cost advantage of relocating manufacturing out of China is significantly diminished.
Trump's tariffs could encourage China to step up its trade with alternative markets, but no other country currently comes even close to U.S. consumption power, where Chinese producers sell more than $400 billion worth of goods annually.
"The imposition of tariffs by Trump surely won’t be beneficial for Chinese companies and could lead to significant distress in certain industries; however, these measures aren't likely to leave an indelible impression on the broader Chinese economy,” stated William Hurst, who holds the position of Chong Hua Professor of Chinese Development at the University of Cambridge.
"The significance of U.S. exports to China is decreasing. The new American tariffs will likely encourage increased Chinese trade with various regions including Europe, Southeast Asia, and Africa," he noted.
However, Chinese manufacturers have characterized moving to alternate markets as a " rat race," leading to pricing battles amongst exporters. This situation has the potential to exacerbate deflationary pressures in the world’s second-largest economy, as companies keep compressing their narrowing profit margins.
China has kept its economic target for this year unchanged at "around 5%" despite Trump's tariff salvos which could call time on a largely export-led recovery underway since the end of the COVID-19 pandemic.
The administration has committed additional fiscal stimulus, expanded debt offerings, deeper monetary ease, and placed heightened focus on stimulating local consumption to mitigate the effects of the trade conflict.
Osman mentioned that "China had been anticipating this situation for quite some time. The comparatively moderate stimulus announcements during the Two Sessions in March were a strategic decision rather than an omission." He was alluding to China's yearly legislative gatherings known as the Two Sessions.
She further noted that Beijing has deliberately maintained larger reserves in both domestic stimulus initiatives and countermeasures to use them more assertively if needed.
China's President Xi Jinping may join the discussion as well, given reports suggesting both leaders might convene for a meeting in June in the U.S.
Craig Singleton, a senior fellow at the Washington-based think tank Foundation for Defense of Democracies, stated that Trump and Xi find themselves in a bind characterized by mutual pressure and national pride.
" Trump's approach combines intense pressure with unexpected diplomatic gestures—he views leverage and engagement as mutually supportive strategies. In contrast, Xi proceeds cautiously and avoids risks, depending instead on postponement and strict control. However, the challenge lies in this: should he choose not to engage, the pressure intensifies; yet engaging prematurely could make him appear vulnerable," he explained.
"Neither wants to be seen as folding first, but delay could deepen the standoff."
(Liz Lee, Ella Cao, Jing Wang, Joe Cash, and Xiuhao Chen contributed reporting; edited by Kim Coghill and Michael Perry)