China’s strengths and weaknesses in Trump’s new trade war

China and the United States are now like two old rivals who have come together after four years to resume a postponed duel: the second trade war launched by Donald Trump is in fact a continuation of the one he himself started in 2018; this is just a new battle. After the first blow was delivered by the Republican president, who on February 1 announced an additional 10% tariff on all Chinese imports, Beijing immediately returned fire.

The response was limited and directed against different U.S. sectors: it set tariffs of between 10% and 15% on 80 additional U.S. energy products and manufacturers (well below the White House’s swipe); it opened an antimonopoly investigation into Google (whose search engine is banned in the country and, therefore, has a reduced presence); it set restrictions on the export of minerals that are critical to the technology and arms industries, and it added the U.S. companies PVH (owner of Tommy Hilfiger and Calvin Klein) and Illumina (dedicated to biotechnology) to the list of unreliable entities, which gives it a free hand to impose punitive measures.

Beijing’s limited response has been widely interpreted as a willingness to negotiate. It is also an outline of the measures it could have at its disposal in the event of a resurgence of the trade war. Some analysts, especially those close to Beijing, say that the country is better prepared to withstand the crisis than it was in 2018; others believe that its economy, burdened by the real estate crisis and its excessive dependence on exports, leaves precious little wiggle room.

These are “symbolic and selective reprisals,” says Wang Huiyao, a former adviser to the Chinese government and now head of the Center for China and Globalization, based in Beijing. In his opinion, they show an openness to dialogue. While the tariffs on the United States, which were activated on Monday, affect American products worth around $14 billion, U.S. tariffs affect Chinese imports estimated at around $525 billion.

The tariffs aim to minimize the economic consequences, while demonstrating that China will not back down, analysts at Trivium China wrote in a recent newsletter. “But if Trump does not negotiate, Beijing will probably attack more American imports.” So far, there has been no official call between the U.S. president and his Chinese counterpart, Xi Jinping, to discuss a possible agreement, as he did provisionally with Canada and Mexico.

For the American think tank Brookings, the limited response has an explanation: after seven years of trade war, with mutual imposition of tariffs and export restrictions, the Chinese government has “fewer levers to pull,” it states in an article.

In 2018, “it had a lack of understanding” of what a trade war entailed, says Dong Shaopeng, a senior researcher at the Chaoyang Institute for Financial Studies at Renmin University in Beijing. Now, it better understands “the hegemonic practices of the United States,” adds this observer who is close to the Chinese government.

Since then, Beijing has emphasized self-sufficiency in many sectors, especially technology, and diversified its exports. Many of these new recipients of Chinese products are also nations in the Global South, with which Beijing aims to intensify ties and gain ground in the geopolitical theater. The flow of goods to the countries of the New Silk Road, China’s mega investment and infrastructure program, already accounts for more than 50% of exports, Wang points out. This will probably be a line to follow in the next four years.

Beijing’s strategy is to prepare to “take advantage of Trump’s disruption” on the global stage, argues Yun Sun, director of the China Program at the Stimson Center, in a recent piece in Foreign Affairs. Chinese officials, he argues, assume that their policies will single-handedly dismantle the foundations of American global hegemony. “The prevailing wisdom is that China must prepare for storms ahead in its dealings with the United States.”

Among other things, it will have to deal with its own internal economic stability. China grew by 5% in 2024, above other countries, but with signs of cooling, and far from the 6.9% GDP growth rate of 2017. Consumption remains sluggish, domestic debt is high and household wealth is suffering from the bursting of the real estate bubble. Beijing has been launching stimulus measures for months, and more proposals are expected in the coming months.

“Americans know that things are not going well,” says Alicia García Herrero, chief economist for Asia-Pacific at Natixis. “But technological tours de force (such as the DeepSeek artificial intelligence system) give China some leverage, because the U.S. is unable to contain its rise, or so it seems.” The emergence of a Chinese AI that is supposedly cheaper and more efficient than OpenAI has been a way of telling its rival that sanctions will not slow its development.

In this context, exports are essential for Beijing, which encourages them as a way to stimulate growth. In 2024, China had a trade surplus of almost a trillion dollars, the largest in history, so anything that sounds like a crescendo of trade barriers is an alarm to be heeded. But this export machinery is a double-edged sword, and has provoked protectionist responses beyond the United States: the European Union has already begun to put up a wall against Chinese products such as electric cars.

China is confident that the tide can turn, especially if Trump’s tariffs hit the entire world. The 25% tariffs announced this week on aluminum and steel regardless of origin are a case in point. “If [the U.S.] imposes tariffs on everyone, it forces everyone to have more [trade] with China,” Wang says.

Beijing has already signaled that it is seeking a rapprochement with the EU, and Brussels has shown an openness to deepening the relationship. Chinese officials are also considering tariff cuts for non-U.S. partners, according to The Wall Street Journal, in order to boost foreign investment and trade with Europe and other Asian countries. Such measures would benefit the Chinese economy, and could undermine U.S. alliances and project an image of Beijing as a global leader.

García Herrero believes that the Chinese response should be understood as a gesture “for the domestic audience,” but with the idea of continuing negotiations. She believes the investigation into Google is not significant; Trivium thinks it possible that it could be directed against its Android operating system, the majority one in Chinese mobile phones. But, in addition, it is a warning that they could open proceedings against companies with a larger market in China, such as Apple. “That would be much more serious,” says García Herrero.

Restrictions on critical minerals and rare earths, a sector in which China accounts for almost 90% of global processing, is an area in which it has room to continue turning off the tap. In October, it approved new mechanisms to restrict exports of dual-use products (civilian and military); shortly after, it stopped exports to the U.S. of materials such as germanium, gallium, antimony and graphite in response to the technological sanctions of the Joe Biden administration. These elements are key in the manufacture of semiconductors and batteries.

Now, China has added tungsten, tellurium, bismuth, molybdenum and indium derivatives to the list subject to control: these are inputs linked to the military and heavy industry; to the production of semiconductors and steel; to high-speed electronics, optoelectronics and photovoltaics. Trivium warned last year that the United States and China were on the verge of a “mineral trade war.” “With the latest actions,” they conclude, “we have crossed the line.”

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition