This article analyzes China's strong response to the trade war initiated by Donald Trump. China has implemented reciprocal tariffs and other measures like export controls and adding US firms to its "unreliable entity list." This hard-line stance, while potentially leading to economic decoupling and impacting China's GDP growth, is driven by strategic calculations and national pride.
While trade with the US constitutes only 2.5% of China's GDP, the US remains a significant export market. The trade war is predicted to reduce China's GDP growth by 1.5 to 2 percentage points, potentially causing economic hardship. China is mitigating this by focusing on domestic demand and self-sufficiency through its "dual circulation" model and strengthening ties with other countries.
The trade war forces smaller economies to choose sides, potentially pushing them towards the US. This shifts not only economic reliance but also geopolitical alliances. China's strategy involves domestic adjustments to reduce reliance on the US, including enhanced industrial upgrading and strengthening ties with the Global South.
China believes Trump's tariffs are a deliberate attempt to corner it. The response isn't just economic; it's a clash of national pride and strategic positioning. Beijing views the trade war as a long-term struggle against US efforts to contain its rise, a belief reinforced by the policies of both Trump and Biden administrations.
Despite some initial support for Trump in China, his aggressive actions have shifted public opinion against him. Many now view his tariffs as bullying, and China's hardline stance has garnered support. This internal support strengthens China's resolve in the face of the trade war.
China's strategy is multifaceted: a tit-for-tat response to US tariffs, coupled with strategic economic and geopolitical adjustments to reduce dependence on the US and build resilience. The long-term consequences are unclear, but China is prepared for a prolonged conflict.