China Holds More Trade War Cards Than Trump Thinks

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Perhaps counterintuitively, this prolonged downturn may have made the Chinese economy more resilient to shocks. It has pushed businesses and policymakers to come to factor in the existing harsh economic realities, even before the impact of Trump's tariffs.

Trump's tariff policy against China may also allow Beijing a useful external scapegoat, allowing it to rally public sentiment and shift blame for the economic slowdown onto US aggression.

China also understands that the US cannot easily replace its dependency on Chinese goods, particularly through its supply chains. While direct US imports from China have decreased , many goods now imported from third countries still rely on Chinese-made components or raw materials.

By 2022, the US relied on China for 532 key product categories – nearly four times the level in 2000 – while China's reliance on US products was cut by half in the same period.

There's a related public opinion calculation: Rising tariffs are expected to drive up prices , something that could stir discontent among American consumers, particularly blue-collar voters. Indeed, Beijing believes Trump's tariffs risk pushing the previously strong US economy toward a recession .

U.S. President Donald Trump looks at Chinese President Xi Jinping during the plenary session at the G20 Summit on July 7, 2017, in Hamburg, Germany. Photo: Mikhail Svetlov / Getty Images via The Conversation Potent tools for retaliation

Alongside the changed economic environments, China also holds a number of strategic tools for retaliation against the US. It dominates the global rare earth supply chain – critical to military and high-tech industries – supplying roughly 72% of US rare earth imports, by some estimates.

On March 4, China placed 15 American entities on its export control list , followed by another 12 on April 9. Many were US defense contractors or high-tech firms reliant on rare earth elements for their products.

China also retains the ability to target key US agricultural export sectors such as poultry and soybeans – industries heavily dependent on Chinese demand and concentrated in Republican-leaning states.

China accounts for about half of US soybean exports and nearly 10% of American poultry exports. On March 4, Beijing revoked import approvals for three major U.S. soybean exporters .

And on the tech side, many US companies – such as Apple and Tesla – remain deeply tied to Chinese manufacturing. Tariffs threaten to shrink their profit margins significantly , something Beijing believes can be used as a source of leverage against the Trump administration. Already, Beijing is reportedly planning to strike back through regulatory pressure on US companies operating in China.

Meanwhile, the fact that Elon Musk, a senior Trump insider who has clashed with US trade adviser Peter Navarro against tariffs , has major business interests in China is a particularly strong wedge that Beijing could yet exploit in an attempt to divide the Trump administration.

Chinese and U.S. flags fly at a booth during the first China International Import Expo on Nov. 6, 2018, in Shanghai. Photo: Johannes Eisele / AFP via Getty Images A strategic opening for China?

While Beijing thinks it can weather Trump's sweeping tariffs on a bilateral basis, it also believes the US broadside against its own trading partners has created a generational strategic opportunity to displace American hegemony.

Close to home, this shift could significantly reshape the geopolitical landscape of East Asia. Already on March 30 – after Trump had first raised tariffs on Beijing – China, Japan and South Korea hosted their first economic dialogue in five years and pledged to advance a trilateral free trade agreement.

The move was particularly remarkable given how carefully the US had worked to cultivate its Japanese and South Korean allies during the Biden administration as part of its strategy to counter Chinese regional influence. From Beijing's perspective, Trump's actions offer an opportunity to directly erode US sway in the Indo-Pacific.

Could China's dragon economy slay Trump's tariffs? Photo: Wang Zhao / AFP via Getty Images / The Conversation

Similarly, Trump's steep tariffs on Southeast Asian countries, which were also a major strategic regional priority during the Biden administration, may push those nations closer to China.

Chinese state media announced on April 11 that President Xi Jinping will pay state visits to Vietnam, Malaysia and Cambodia from April 14-18, aiming to deepen“all-round cooperation” with neighboring countries.

Notably, all three Southeast Asian nations were targeted with now-paused reciprocal tariffs by the Trump administration – 49% on Cambodian goods, 46% on Vietnamese exports and 24% on products from Malaysia.