[Text/Observer Network Xiong Chaoyi] US President Donald Trump has ignited a global tariff trade war, with China being the hardest hit. Although China is the surplus country and the US is the deficit country in their trade relationship, many experts have reminded that the US should not underestimate China's ability to withstand Trump's coercive strategies.
The Financial Times reported on April 15th that in this tit-for-tat confrontation, China holds multiple cards - increasingly diversified export markets, huge US Treasury bonds, control over key strategic minerals, as well as the advantage of its national system in times of crisis. These assets not only enable China to withstand challenges but also highlight its strength during negotiations.
Bloomberg reported on April 14th that while trade wars indeed have no winners, one fact is becoming clearer in this trade war initiated by Trump - China's leverage may be more powerful than the US anticipated, especially when people begin to pay attention to its countermeasures. In fact, in Sino-US economic and trade relations, the US is deeply reliant on Chinese goods, and restricting imports becomes self-harmful.
The report mentioned that in a consumer-driven American economy, taxing popular consumer goods will have serious consequences, which also weakens Trump's negotiation position. The report noted that China has not compromised in negotiations under Trump's bluster.
A chief China economist from a renowned economic research institution stated bluntly: "Judging from market reactions, I believe the pain is currently greater for the United States... The US is under greater pressure to negotiate at the negotiating table."
On April 2, 2025, the White House, Washington D.C., Trump delivered a speech holding a report about trade barriers. Visual China
Who depends more on whom, China or the US?
The Financial Times pointed out that last year, China's trade surplus with the US was close to $300 billion, with approximately 15% of its total exports going to the US. Trump's recent announcement of increased tariffs on China is indeed dramatic, but international economists noted that this overlooks a key fact: China can find alternative import sources more easily than the US, whereas the opposite is not true.
US exports to China are mainly concentrated in agriculture, such as soybeans, cotton, beef, and poultry, thus having lower added value. In contrast, many products imported from China, such as electronics, machinery, and processed minerals, are just the opposite.
Marta Bengoa, an economics professor at City College of New York, said that although China and the US remain highly interdependent in trade, this means the risk ultimately falls on the US side. "The US depends more on China because it is easier for China to procure agricultural products from other places than for the US to replace electronic products and machinery," she said. "For example, China is already purchasing a large amount of soybeans from Brazil, meaning China has more leverage in the end."
Bloomberg also pointed out that the traditional view holds that countries with trade deficits, like the US, have an advantage in trade conflicts compared to surplus countries. This simple logic is based on the idea that if I buy your goods in large quantities for a long time, reducing imports will cause greater harm to you.
But the key question is, what happens when the US really needs Chinese goods? What happens when these "Made in China" products actually come from US companies? What happens when restricting imports becomes self-harming?
This contradiction, especially the latter situation, is particularly evident in Sino-US economic and trade relations. Despite the US's deep reliance on numerous Chinese goods, Washington hawks have distorted this into a justification for launching a trade war.
This complexity of economic interdependence was clearly evident in Trump's administration's decision to exempt certain technology products, such as smartphones, laptops, and memory chips, from tariffs. A key reason was obvious: companies like Apple, which rely on Chinese production, simply cannot withstand a 145% tariff imposed by Trump on China.
"China has been prepared for contingencies and is highly resilient economically."
China's dependence on the US market for exports has significantly decreased. US government data shows that China's share of US imports has dropped from 21% in 2016 to 13.4% in 2024, greatly reducing China's exposure to trade risks.
Meanwhile, China's production capacity has been repositioned through Southeast Asian countries like Vietnam and Cambodia. The Financial Times claims this is a "strategic backdoor," and whether Trump will firmly block this "backdoor" remains to be observed. Currently, Vietnam's trade surplus with the US amounts to $124 billion and has been subject to a 46% "reciprocal tariff," though this rate will be deferred for 90 days, providing some breathing room.
Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis and senior researcher at the Brussels-based Bruegel Institute, believes that even if China's exports suffer a hard stop, it would not be catastrophic for China's vast economy.
"China is a resilient large economy," García-Herrero said.
Alfredo Montufar-Helu, director of the China Research Center at the Conference Board, a US think tank, pointed out that although China is also addressing its own challenges, it has the institutional advantage and greater ability to stimulate its own economy when entering a trade deadlock.
"US Treasury bonds and key minerals, China holds many trump cards."
The Financial Times pointed out that the accumulated massive US Treasury bonds are a key card held by China. In theory, China could reduce its risk exposure by selling these bonds, which might raise concerns among market participants about the attractiveness of US assets and accelerate further devaluation of the dollar and US Treasuries, making imported goods from the US more expensive.
Since the beginning of this year, the trend of US Treasury yields Financial Times chart
Zerlina Zeng, head of Asian credit strategy at research firm CreditSights, also expects that China will continue to implement a long-term foreign exchange reserve diversification strategy, gradually converting dollar assets into assets denominated in other currencies.
After Trump announced the so-called "reciprocal tariffs" on April 2nd, he suddenly announced a 90-day deferral for most countries on April 9th, retaining only 10% of the so-called "baseline tariffs." Some speculate that this may be related to the massive sale of US Treasury bonds, with rumors even pointing to Japan.
Reuters reported that last week, US Treasury bonds were heavily sold off, causing long-term yields to rise by the largest margin since the outbreak of the COVID-19 pandemic in 2020. The US, which should play the role of a safe haven for financial turmoil, suffered greater losses. Some investors speculated that given the impact of Trump's trade policies, global foreign exchange reserve managers like China may be reassessing their holdings of US Treasury bonds.
In addition to Treasury bonds, the US relies on China for many rare earth metals vital to modern manufacturing, such as materials used in electric vehicle batteries, with China controlling more than two-thirds of global rare earth production and over 90% of processing capabilities.
This "vulnerability" in the US has long been seen by Trump, who left "backdoors" after implementing the "reciprocal tariffs," including key minerals and six other categories of goods on the exemption list.
The report noted that however, if China takes a tough stance, such exemptions may not be enough to avoid supply crises. Previously, when China retaliated against US tariffs, it issued an announcement implementing export control measures on seven types of heavy rare earth-related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, which are core raw materials for products like aircraft engines and electric vehicles.
Of over 1,000 US weapon systems using gallium, germanium, and antimony, 87% of the supply chain depends on Chinese suppliers Graph by Govini
"Currently, the US feels the pain more acutely and is trying to return to the negotiating table."
Bloomberg argued that in a consumer-driven US economy, taxing popular consumer goods will have serious consequences and once again mentioned Trump's decision to exempt certain technology products from tariffs. The report stated that this event indicates that in this trade war, the power of US consumers is often overlooked, and they also have a vote, which weakens Trump's own negotiation position.
"However, China's countermeasures and tools go far beyond this."
The report cited a new study by US China experts Evan Medeiros and Andrew Polk, systematically outlining China's "precision-guided economic arsenal": including export controls on key raw materials and the unreliable entity list. "These two people said that signs indicate that China will use these new economic weapons more frequently at the beginning of Trump's second term."
Although the EU also threatened that if negotiations fail, it may target US service exports and online advertising sales, Bloomberg believes that China remains "unique" in this contest. So far, China's response has not only been to retaliate on the tariff level but also to maintain a clear and resolute stance on issues related to negotiations, without being led by the US nose.
The Financial Times quoted Julian Evans-Pritchard, chief China economist at Capital Economics, adding that "judging from market reactions, I believe the US is currently feeling stronger pain... The US is under greater pressure to try to sit at the negotiating table for talks."
On April 10th, the Ministry of Commerce held a regular press conference. A reporter asked whether China had engaged in negotiations with the US regarding tariff issues.
The spokesperson for the Ministry of Commerce stated that China's position is clear and consistent. If we talk, the door is open, but dialogue must take place on the basis of mutual respect and equality; if we fight, China will see it through to the end. Pressure, threats, and blackmail are not the right way to deal with China. It is hoped that the US will move toward China,本着mutual respect, peaceful coexistence, and win-win cooperation, and properly resolve differences through dialogue and consultation.
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