It has begun.
At 12:01 AM EST (04:01 GMT) on Wednesday, the “reciprocal” trade tariffs implemented by US President Donald Trump came into effect. Among various nations impacted, China has faced the brunt of these tariffs, now effectively imposing a levy of 104 percent on goods sold to the United States.
As Washington initiated discussions with other trading partners affected by these tariffs, the new restrictions on Beijing have resulted in a situation where US imports from China will cost more than double what they did two months prior. In retaliation, China promptly escalated its tariffs on US goods to 84 percent.
Since the announcement of tariffs on numerous countries last week, stock markets have plummeted as investors prepared for the consequences of what has evolved into a global trade conflict.
Trump has repeatedly accused other countries, particularly China, of taking advantage of the US in trade matters, framing his protectionist policies as essential for revitalizing domestic manufacturing and restoring American jobs.
Current Status of US-China Tariffs
On February 3, Trump imposed an additional 10 percent tariff on all Chinese goods, adding to previously established tariffs from his first term (2017-2021) and those set by former President Joe Biden during his term (2021-2025).
On March 5, Trump raised the tariff on Chinese imports to 20 percent. By April 2, this rate increased by another 34 percent, totaling a 54 percent levy.
Last Friday, April 4, China responded by announcing a 34 percent reciprocal tariff on US imports.
Trump heightened tensions further by threatening to impose more tariffs unless Beijing retracted its tariffs on US products.
“If China does not retract its 34 percent increase, which is already above their longstanding trade abuses by tomorrow, April 8, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9,” Trump posted on his Truth Social platform on Monday.
As the countdown continued, Trump appeared confident that Beijing would relent. “China is eager to strike a deal, but they are unsure how to initiate it,” the US president noted in a social media update. “We await their call. It will happen!”
However, it did not. Instead, Beijing raised its tariffs on US imports to 84 percent on Wednesday.
China’s Response to Trump’s Tariffs
In its latest announcement regarding tariffs on US exports on April 9, China’s Commerce Ministry declared that Beijing “has the strong will and ample means to enact necessary countermeasures and fight to the end.”
“History and facts have shown that the US’s tariff increases won’t resolve its own issues,” the ministry’s policy statement asserted.
“Instead, it will lead to sharp fluctuations in financial markets, escalate inflation pressures in the US, weaken its industrial base, and heighten the risk of a recession, ultimately backfiring on the US itself.”
In a statement the previous day, on April 8, the Ministry of Commerce expressed defiance, labeling Washington’s actions as “completely unfounded” and an act of economic “bullying”.
Beijing justified its reciprocal tariffs as necessary to protect China’s “sovereignty, security and development interests” and to sustain a balanced international trade environment.
Additionally, Lin Jian, spokesperson for China’s Foreign Ministry, stated, “We Chinese are not provocateurs, but we will not back down when faced with challenges.”
Impact of Tariffs on China’s Economy
Despite the rising tensions, the US and China remain key trade partners.
According to the Office of the United States Trade Representative, American imports from China totaled $438.9 billion last year.
This represents approximately 3 percent of China’s overall gross domestic product (GDP), which is heavily dependent on exports.
In a report released on Tuesday, Goldman Sachs projected that Trump’s latest tariffs could reduce China’s GDP by as much as 2.4 percent.
The investment bank anticipates a growth rate of 4.5 percent for this year, expressing concern that China’s traditional strategy of rerouting exports through countries such as Vietnam and Thailand to avoid US tariffs may become less viable due to Trump’s global trade barriers.
That 4.5 percent growth prediction is below the Chinese government’s official target of 5 percent for 2025.
UBS analysts are even more pessimistic, estimating that Trump’s tariff increases could slow China’s economic growth to merely 4 percent in 2025, assuming the government engages in significant fiscal expansion.
China’s economy is already experiencing slower growth compared to when Trump first took office. The new trade conflict emerges as China battles deflation, a troubled property market, and high debt levels.
In 2018, when Trump initiated his first trade war with China, Beijing’s official GDP growth rate was 6.6 percent.
Nevertheless, according to Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst, China is better equipped than many nations to manage the repercussions of Trump’s trade policies.
Beijing’s Response So Far
Al Jazeera’s Beijing correspondent, Katrina Yu, reports that Chinese officials are working diligently to mitigate stock market shocks.
“The government possesses the ability to intervene robustly,” Yu affirmed.
On Tuesday, Premier Li Qiang stated that the government is “fully capable of counteracting adverse external influences”.
That same day, several public investment firms, including Chengtong and Huijin, pledged to increase stock purchases and prevent financial market declines.
Yu observed that Chinese stock markets have outperformed others in Asia.
The Shanghai SSE Composite Index gained 1.1 percent on Wednesday, while the Shenzhen SE Composite rose by 2.2 percent. In contrast, Japan’s Nikkei index fell by 3.9 percent.
“The Chinese government is striving to stabilize the stock market. Thus far, it appears effective, but many investors remain anxious,” Yu highlighted.
China’s Next Steps
To lessen the impact of the tariffs, Beijing is likely to focus on domestic stimulus and enhancing relations with trading partners to meet a growth target of “around 5 percent,” according to Ghosh.
“I anticipate further reductions in China’s already low interest rates, along with increased borrowing by local governments and support for affected export workers,” she informed Al Jazeera.
Ghosh suggested that China might “quietly” boost exports to trading partners, especially in the Global South, possibly through initiatives such as “loans and debt relief.”
Additionally, she indicated that China’s central bank may allow the yuan to devalue, thereby reducing export prices and counterbalancing some losses from the tariffs.
Although Ghosh believes that China’s $20 trillion economy “should be capable of absorbing” the impact of US tariffs, some economists worry about Beijing’s fiscal stability.
On April 3, ratings agency Fitch downgraded China’s sovereign credit rating, highlighting rapid government debt increases and risks to public finances as authorities prepare to shield the economy from escalating tariffs.
However, Ghosh remarked that “there is a prevalent Western outlook expecting the imminent collapse of the Chinese economy.”
“My greater concern lies with the US economy,” she concluded.
