The trade between the world's two largest economies – a link that defined the world economy for two decades – is about living support. American rates on China are now at 145%; China's rates on the US are now at 125%. And that is only the basic line, excluding additional rates for specific goods such as steel (in the case of the US) or agricultural products (in the case of China).
“The rates are now so high that they are priceless for most direct bilateral trade,” says Yeling Tan, a professor in public policy at the University of Oxford.
Even Beijing acknowledges that, with rates that are so high, American goods have no chance. “Given that American goods in China can no longer be sellable in China among current tariff rates, if the US further increases rates about Chinese exports, ignore such measures,” said the country's Ministry of Finance in a statement in which the new 125% rates are announced.
The rates are quickly relaxing a narrow economic relationship: Chinese manufacturers have built products, from grass chairs and Christmas decorations to smartphones and semiconductors, and they bought American consumers and companies.
Both Washington and Beijing have indicated that they are open to negotiations, even if there are no public signs that they are talking. Each thinks the other person has to move first; on Friday morning, CNN Reported that the US, instead of asking for a phone call with XI, that China should request a phone call with Trump instead.
The US may have realized that the steep rates on China are not sustainable. At the end of Friday exempt electronic goods such as smartphones, laptops and computer processors of American rates, including some imposed on China.
The US imported $ 438 billion in goods from China in 2024, compared to $ 143.5 billion in China-related exports, according to data from the US Census Bureau.
The rate of 145% of Trump on Chinese import is only the basic line. There are also 25% rates for steel and aluminum import, and the impending threat of a rate of 25% on every country that uses Venezuelan oil, a set that includes China. And then all earlier rates have been beaten by earlier administrations: on Chinese household appliances, solar panels and EVs.
Beijing has also made extra rates on American goods, such as heavy machines, oil, gas and agricultural products. It has also imposed a series of other non-tariff barriers; On Friday, for example, Chinese officials said they will reduce the number of American films for display in China.
If the current situation persists – 145% rates for China, 10% for everyone else – both Western and Chinese companies will probably speed up their drive to set up production hubs outside of China in countries such as Vietnam, India and Mexico.
The problem is that Trump's trading houses want to relax “China Plus one” strategy. Trump's now balanced rates for “Liberation Day” set high rates at countries such as Vietnam and Cambodia that attracted Chinese investments. Civil servants such as Trump Trade Advisor Peter Navarro want governments to focus on Chinese trade as a condition for reducing rates.
Vietnam offers to combat Chinese goods traveling through its territory as part of tariff negotiations with the US, Reuters Reports with reference to a government document and an unnamed source.
Then there is the risk that Trump cannot reach a deal with trading partners and return the “Liberation Day” rates. “Factories that have already shifted to connector countries will probably increase production to take advantage of the break, but there may be fewer new investments for fear of rates that rise in the” plus one “countries,” Tan suggests.
The steep rates of China also encourage American companies that export to the second largest economy in the world to consider their own diversification of the supply chain. On Friday, the China Semiconductor Industry Association confirmed that companies did not have to pay rates for American chips and chipping equipment as long as they were made at a third location.
Trump officials claim that China is much more vulnerable to a trade war than the US, which claims that the Chinese economy depends on the American consumer. If the US closes its doors, China will not have anyone to sell and the economy will collapse.
The White House now also says that Trump's tariff break was a deliberate strategy to isolate China while opening negotiations for the rest of the world. “You could even say that he brought China in a bad position,” Finance Minister Scott Bessent told reporters on Wednesday; He also proposed that the US and its allies can work together to put China under pressure on trade.
In reality, China now relies less on the US than during the first government Trump. Less than 15% of China exports go directly to the US, compared to around 19% in 2018. Beijing has also cultivated alternative sources for what it imports from the US, such as Brazil and Australia for agricultural products. The Rundvleesexport from Australia to China in the past two months has already risen 40% years on year.
“China has options,” says Brown, and notes that the largest trading partner in China is now Southeast Asia. “It is not mandatory for the US in a way it once was.”
To be clear, economists expect that China will take an economic hit from Trump rates, in which banks such as Citi and Goldman Sachs cut their GDP predictions of 2025 for the second largest economy in the world.
Nevertheless, Beijing accepts a daring attitude in his fight with the US, with spokesmen who say that China will “fight to the end” if the US persists in a trade war.
Apart from the attitude, Beijing can be in a safer position than the trade war of the American Trump, is already stock markets, the yields of the bonds and the sinking of the US dollar – and that is seriously affected before the inflationary effects of the rates are seriously affected.
Dexter Roberts, not -ing Senior Fellow at the Global China Hub of the Atlantic Council, explains that “people in China really feel that they” can eat bitterness, “referring to a Chinese expression that means to persevere by hardening.” That plays in their heavy attitude. I think they believe that in the end, if someone starts to blink, it will be the US “
Roberts adds that, at least from the Perspective of Beijing, the First Trade War has never really ended. The Biden administration held the earlier rates of Trump on Chinese goods in place. Biden also imposed his own rates, such as a 100% rate of Chinese EVs, and – perhaps more irritating for Beijing – have the technical sector of China focused on measures such as US Chip export bans.
That means that Beijing has been on a “trade war foot” since 2016. China has built commercial relationships with other markets, found new sources to replace American raw materials and invested in its own technology companies. “China has been preparing for a number of years now for a world with less access to the American market,” says Tan.
And a trade war, although painful, could accelerate some other priorities of Beijing. “In a strange way it fits a bit with Beijing's long -term goals to switch their economy from its dependence on the West and with exports,” says Roberts.
However, China cannot easily move its export markets to other regions such as Europe, the Central East or Southeast Asia. Firstly, these regions – even developed markets such as Europe – really do not have the same consumption potential as Americans. Then there is the risk of recoil. “These countries are wary to be confronted with an increase in Chinese imports derived from the American market,” warns Tan.
Economists largely agree that a complete decoupling between the US and China would be extremely painful for both countries. Rates of more than 100% are “absolutely punished,” says Iain Osgood, professor of international relations at the University of Michigan. “There are many companies in the US that might not survive that at all. Even large retailers will just struggle.”
That may mean that ultimately the two parties will try to find a way to scale things back – or the US can unilaterally reverse some of its rates when the pain starts to hit. Even then, rates will probably not be withdrawn to the level before 2024, let alone the level before 2018. Osgood thinks rates can be reduced to a relatively “wiser” level, perhaps between 15% and 30%.
Nevertheless, the rapid escalation of the trade war in the US raises an uncomfortable question: what does the world look like when the two largest economies refuse to deal with each other?
A world where Beijing and Washington cannot de-escalate can be dangerous. Business relationships due to the presence of companies and strange subjects really have a 'tempering influence', says Roberts, even if the idea is sometimes over -played. “If you are increasingly isolated and you have no business relationships … the chance of conflict will definitely go up.”
“At the end of the day, the fate of the two gigantic economies remains intertwined. A collapse of direct bilateral trade will harm companies and consumers in both countries,” says Tan.
“It will be a much more fleeting world.”
This story was originally visible on Fortune.com
