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3. China's Counterattack: Punitive Tariffs in Retaliation to Trump

Shortly after taking office, US President Donald Trump imposed a 10% tariff increase on Chinese goods, raising the total duties on imports from China to 20%. Trump criticized China for not doing enough “to curb the flow of fentanyl, a potent opioid, into the US,” as stated by the White House on X.

In retaliation, the Chinese government imposed additional tariffs: 10% on US soybeans and pork, and 15% on chicken, wheat, corn and cotton.

The first to feel the consequences of these measures were American farmers who exported to China, the second-largest importer of soybeans from Uncle Sam. In 2024, soybean exports to China reached $11 billion. Trump’s trade war severely disrupted global agricultural markets, leading to price drops: corn fell more than 11%, wheat dropped 12% and soybeans lost over 5%, dipping below the critical $10 per bushel mark.

However, Chinese retaliatory tariffs don’t apply to all US products. Only around $14 billion worth of American goods were affected, which represented less than 10% of US exports to China in 2023. Why? China exports three times as much to the US as it imports, limiting its ability to impose further tariffs.

This strategy allows China to deliver a blow without provoking significant retaliation. Beijing’s caution is evident, as it remains aware of its reliance on the US to maintain its economic stability. In 2024, Chinese exports to the US reached a staggering $525 billion.

The Xi Jinping administration is fully aware of the risks that could emerge, further escalating trade tensions with the US.

On Wednesday, during a session attended by 3,000 delegates at the Great Hall of the People in Beijing, Premier Li Qiang confirmed that China’s growth target for the third consecutive year would remain at 5%. While “ambitious,” this target highlights China's resolve to maintain economic stability despite forecasts of declining exports due to worsening trade relations. To support this growth, the Chinese government has decided to raise its fiscal deficit to 4% of GDP, signaling its readiness to increase public borrowing to fund an economic stimulus.

Economists argue that China is now better equipped to face a trade war with the United States than it was in 2017, during Donald Trump’s first term.

In 2024, China’s economy grew by 5%, driven by extensive stimulus programs designed to boost consumer spending and stabilize the struggling real estate sector.

In his speech, Li Qiang also set a target for urban unemployment to remain below 5.5% and announced plans to create 12 million new urban jobs. Another key figure was the Chinese defense budget, which increased by 7.2%, reaching $245 billion.

Furthermore, Beijing has made its intentions clear: it plans to prioritize multilateral trade agreements, excluding the US. This approach is part of a broader effort to strengthen China’s position in global trade while reducing its dependence on the American market. The “Belt and Road” initiative (The New Silk Roads), pursued relentlessly since 2013, plays a central role in this strategy.

These renewed trade tensions will certainly have far-reaching consequences for both of the world’s largest economies (the US and China), and are expected to disrupt global supply chains.