New Delhi: Donald Trump had planned to impose heavy taxes on trade partners around the world. But, he suddenly changed it dramatically. While other countries got 90 days relief from the new tariff, China was not exempted from it. The intention is to increase further pressure on China. Trump increased the tax on Chinese goods to 125% on April 9, 2025. Trump said that China is not respecting the global market. Perhaps Trump did not like the fact that China is ready to face the American tax directly. Many countries did not take immediate action against Trump's decision to increase taxes. They decided to negotiate. But, China chose a different path. China responded immediately. Imposed a 125% tax on America. Now there is a lot of tension between the two countries regarding trade. China is not ready to back down. According to an expert on US-China relations, this was expected from the dragon. Earlier when Trump started a trade war with China, China wanted to negotiate. But, now China is in a much stronger position. China feels that it can harm America as much as America can harm it. China also thinks that in this situation it can increase its power in the world.
Now the situation has changed for China. There is no doubt that the imposition of tariffs has harmed those Chinese manufacturers who send goods to other countries. Especially those manufacturers who make furniture, clothes, toys and household items for America. Trump first increased the tax on China in 2018. Since then, the situation has changed for China due to many economic reasons.
The US market is no longer that important
The most important thing is that the US market is no longer that important for China's economy. When the trade war started in 2018, 19.8% of the goods China sent to other countries went to the US. In 2023, it decreased to 12.8%. With the imposition of tariffs, China can focus on increasing its domestic demand. This will give people more money to spend and strengthen China's economy.
When the trade war took place in 2018, China's economy was growing rapidly. But now the situation is different. There is a slowdown in the real estate market. People are taking their money out of the country and Western countries are distancing themselves from China. This is weakening China's economy. Trump's tax policy against China can give an excuse to the world's second largest economy. He can tell people that the economy is deteriorating because of America.
China also knows that America cannot easily end its dependence on Chinese goods. Especially in terms of supply chain. Even though America is buying fewer goods from China, it is still dependent on China for many things. Such as goods made in China and raw materials. By 2022, America was dependent on China for 532 types of goods. This is almost four times more than in 2000. At the same time, China's dependence on America has halved.
It is believed that due to increase in tax, prices will increase. This can anger Americans, especially the poor. China feels that Trump's tariffs can lead the US economy to recession.
China has many arrows in its quiver
China has many ways to take action against America. It can allow its currency Yuan to weaken further so that its exports remain cheap. It can also ban the export of rare minerals. Apart from this, sanctions can also be imposed on American companies included in the list of 'unreliable entities' in China.
China has control of the supply chain of rare minerals. This is very important for military and high-tech industries. About 72% of the rare earth elements the US imports are believed to come from China.
China placed 15 US companies on its export control list on March 4. Twelve more companies were added to the list on April 9. Many of these are US defense companies or high-tech companies that rely on rare earth elements.
China could also target US agricultural products such as poultry and soybeans. These industries are heavily dependent on Chinese demand and are in Republican states. About half of the soybeans the US exports to other countries go to China. China revoked import approval from three large US soybean companies on March 4.
Many US companies, such as Apple and Tesla, manufacture in China. Tariffs could reduce their profits. China could use this against the Trump administration.
China is believed to be planning to put pressure on US companies that operate in China. Elon Musk has huge business interests in China. China can take advantage of this to divide the Trump administration. Elon Musk is close to Trump and had argued with American trade advisor Peter Navarro on the issue of tariff.
China feels that America has shot itself in the foot
China feels that it cannot face Trump's tariff
China may be afraid of this. It also feels that the US is weakening American power by attacking its trading partners. China may benefit from this.
This change may change the political environment of East Asia. On March 30 this year (after Trump raised taxes on China), China, Japan and South Korea held their economic talks for the first time in five years. They decided to do business together.
This move is very important because the Biden administration was trying to bring Japan and South Korea with it to reduce China's influence. China feels that Trump's action will reduce America's influence in the Indo-Pacific region.
Similarly, Trump's heavy tariffs on Southeast Asian countries may bring these countries closer to China. Chinese media said on April 11 that President Xi Jinping would visit Vietnam, Malaysia and Cambodia from April 14-18. Its purpose is to work together with neighboring countries.
The Trump administration had imposed taxes on products from Cambodia, Vietnam and Malaysia. Cambodian goods were taxed at 49%, Vietnamese goods at 46% and Malaysian products at 24%. Now, EU and Chinese officials are negotiating on the barriers to trade. They are looking to hold a summit in China in July.
China feels that Trump's tax policy may weaken the US dollar. Imposing taxes on many countries has reduced investors' confidence in the US economy. This has caused the dollar to fall in value. Earlier, the dollar and US Treasury bonds were considered safe. But, the recent turmoil in the market has started raising doubts about this. Heavy taxes have raised concerns about the US economy and its debt. This has reduced confidence in both the dollar and the US Treasury.
Trump's tax will hurt some parts of the Chinese economy. But it seems that this time China has many more options to play with. It has all the means available to harm US interests. Most importantly, Trump's sweeping tariff war is giving China an opportunity.
