Trump-XI’s potential showdown on the card, as the United States targets China only in tariff war
U.S. tariffs on Chinese imports rose to a record 125%, while China suspended dozens of countries. The selective probation was announced hours ago to push U.S. stocks to its best rally since 2008 but to its weakest onshore yuan since 2007.
Please read also: Trump announced a 90-day “pause” for reciprocal tariffs on everyone except China, which raised China’s tariffs to 125%, and Washington said it hopes to put the most pressure on the world’s second-largest economy while seeking competition from other countries with Beijing. The jump in U.S. tariffs are expected to bring the Chinese economy seriously, while economists at Goldman Sachs Group Inc. lowered their 2025 growth forecast to 4% from 4.5% on Thursday.
“We may be able to reach an agreement with our allies,” U.S. Treasury Secretary Scott Bessent said Wednesday. “They are a good military ally, not a perfect economic ally. Then we can approach China as a group.”
Apart from China, countries with higher tariffs that came into effect on Wednesday will now be taxed at a rate of 10% of the baseline rate applicable to other countries. Bessent said he will talk to officials from Vietnam, Japan, India and South Korea in the coming days.
Please read also: Where the U.S. trade war with China
The strategy has brought Trump a course of collision with Chinese President Xi Jinping, whose administration vows to fight “the last” in any confrontation and hopes to connect with trading partners to resist Trump. Beijing’s strong levy on reciprocity has shown no clear signs of trying to connect with Trump.
Trade tensions have surpassed economics. The Pentagon criticized Beijing’s impact on major infrastructure on Wednesday. China has warned citizens to travel or study in the United States, even as Xi calls for more people to communicate with each other to improve relationships.
“Trust has disappeared,” said Davey, director of the Beijing Center for International Security and Strategy. “You will always emphasize security on the balance between economic development and economic security. It’s a long-term change.”
Also Read: Trump calls Xi Jinping “the smartest in the world” and says it is possible to get a “very good deal”
Investors are now looking at whether Beijing will escalate with additional responsibilities or openness to negotiations. Although Chinese authorities have repeatedly expressed willingness to engage in dialogue, their prerequisites for “mutual respect” make meaningful conversations unlikely.
Power competition
In response to Trump’s earlier 50% tariff threat, Beijing raised the levy on all U.S. goods to 84%, an announcement that appears to be intentional time to land before the U.S. market opens. China will also add primarily US defense companies to its unreliable list of entities and export controls, a largely symbolic move, as most target companies have little risk to China.
Also Read: China-US quarrel continues as Beijing raises its retaliatory tariffs on the U.S. to 84%
On the military front, even though defense officials from both countries have formally contacted since Trump returned to the White House, tensions remain. Defense Secretary Pete Hegseth said on his first official trip to Asia that the United States needs to “re-establish” deterrence against China by supporting military forces in the region and through similar efforts to support allies.
This week, he also criticized the Chinese military for “having too much presence in the Western Hemisphere”, calling on the region’s governments to work together to stop China.
With spirals of connection with the United States, China proposed to Europe and Southeast Asia in an attempt to find common causes of Trump’s tariff threat.
China’s Commerce Minister Wang Wenao called on the EU to deepen trade relations at a meeting with European Trade Commissioner Maros Sefcovic on Tuesday to “inject more stability and certainty into the world.”
The next day, Xi Jinping presided over a central working meeting on upgrading diplomacy with neighboring countries, emphasizing that China’s increasing attention to regional relations.
Please read also: With Trump’s tariffs, China lends a hand with others
Stimulating prospects
Domestic, Beijing shows the urgency of strengthening the export economy that grew by one-third last year. According to people familiar with the matter, China’s top leaders are preparing to meet on Thursday to discuss other economic stimulus after Trump’s tariffs were filed.
China has also urged Shein and other companies to avoid diversified supply chains by purchasing from other countries as Beijing tries to avoid making the Exodus.
In a meeting with experts and entrepreneurs on Wednesday, Prime Minister Li Qiang reiterated the need to expand domestic demand. Fujian Province, a coastal region that relies on trade, plans to help exporters sell their goods to Chinese customers to absorb some tariff impacts, a move that could be the action of other trade centers in China.
Amid further warnings to the economy, consumer inflation in China extended the second month of March, with factory deflation lasting for 30 months. Prices may be under pressure to further weaken if exporters redirect certain goods to the domestic market or face higher U.S. tariffs to transfer their products to China.
Peak tariffs
For now, the madness of tariff threats from the United States seems to have reached its peak. Trump said he doesn’t think he has to increase the speed to increase the force negotiations. Economists also suggest that tariff hiking has become less and less impact.
Goldman Sachs economists, including Andrew Tilton, wrote in a note Tuesday that the initial 50% tariff would reduce China’s GDP by 1.5 percentage points. However, the second 50% tariff will have a reduction effect, reducing GDP by only 0.9 percentage points.
“China’s leadership doesn’t seem to be in a hurry to reach a deal,” Julian Evans-Pritchard, head of economics in China, wrote in a report Wednesday. “They seem to conclude that they have the ability to cope with the impact of U.S. tariffs, and Trump will be further disadvantaged with the economic and political impact of tariffs.”
