A trade war between the world's two biggest economies is now in full swing. Chinese exports to the US face up to 245% tariffs, and Beijing has hit back with a 125% levy on American imports. Consumers, businesses and markets are braced for more uncertainty asfears of a global recession have heightened. Chinese President Xi Jinping's government has repeatedly said it is open to dialogue, but warned that, if necessary, it would "fight to the end". Here's a look at what Beijing has in its arsenal to counter US President Donald Trump's tariffs. China is the world's second-largest economy, which means it can absorb the impacts of the tariffs better than other smaller countries. With more than a billion people, it also has a huge domestic market that could take some of the pressure off exporters who are reeling from tariffs. Beijing is still fumbling with the keys becauseChinese people are not spending enough. But with a range of incentives, from subsidies for household appliances to"silver trains"for travelling retirees, that could change. And Trump's tariffs have given the Chinese Communist Party an even stronger impetus to unlock the country's consumer potential. The leadership may "very well be willing to endure the pain to avoid capitulating to what they believe is US aggression", Mary Lovely, a US-China trade expert at the Peterson Institute in Washington DC, told BBC Newshour earlier this month. China also has a higher threshold for pain as an authoritarian regime, as it is far less worried about short-term public opinion. There is no election around the corner that will judge its leaders. Still, unrest is a concern, especially because there is already discontent over an ongoing property crisis and job losses. The economic uncertainty over tariffs is yet another blow for young people who have only ever known a rising China. The Party has been appealing to nationalist sentiments to justify its retaliatory tariffs, with state media calling on people to "weather storms together". President Xi Jinping may be worried but, so far, Beijing has struck a defiant and confident tone. One official assured the country: "The sky will not fall." China has always been known as the world's factory - but it has been pouring billions into becoming a far more advanced one. Under Xi, it has been in a race with the US for tech dominance. It has invested heavily in homegrown tech, from renewables to chips to AI. Examples include the chatbot DeepSeek, which wascelebrated as a formidable rival to ChatGPT, and BYD, which beat Tesla last year to become the world's largest electric vehicle (EV) maker. Apple has been losing its prized market share to local competitors such as Huawei and Vivo. Recently Beijing announced plans to spend more than $1tn over the next decade to support innovation in AI. US companies have tried to move their supply chains away from China, but they have struggled to find the same scale of infrastructure and skilled labour elsewhere. Chinese manufacturers at every stage of the supply chain have given the country a decades-long advantage that will take time to replicate. That unrivalled supply chain expertise and government support have made China a formidable foe in this trade war - in some ways, Beijing has been preparing for this since Trump's previous term. Ever since Trump tariffs hit Chinese solar panels back in 2018, Beijing sped up its plans for a future beyond a US-led world order. It has pumped billions into acontentious trade and infrastructure programme, better known as the Belt and Road initiative, to shore up ties with the so-called Global South. The expansion of trade with South East Asia, Latin America and Africa comes as China tries to wean itself off the US. American farmers once supplied 40% of China's soybean imports - that figure now hovers at 20%. After the last trade war, Beijing ramped up soy cultivation at home and bought record volumes of the crop from Brazil, which is now its largest soybean supplier. "The tactic kills two birds with one stone. It deprives America's farm belt of a once‑captive market and burnishes China's food security credentials," says Marina Yue Zhang, associate professor at the University of Technology Sydney's Australia-China Relations Institute. The US is no longer China's biggest export market: that spot now belongs to South East Asia. In fact China was the largest trading partner for 60 countries in 2023 - nearly twice as many as the US. The world's biggest exporter, it made a record surplus of $1tn at the end of 2024. That doesn't mean the US, the world's biggest economy, is not a crucial trading partner for China. But it does mean it's not going to be easy for Washington to back China into a corner. Following reports that the White House will use bilateral trade negotiations to isolate China, Beijing has warned countries against"reaching a deal at the expense of China's interests". That would be animpossible choicefor much of the world "We can't choose, and we will never choose [between China and the US]," Malaysia's trade minister Tengku Zafrul Aziz told the BBC last week. Trump held firm as stocks plummeted following his sweeping tariffs announcement in early April, likening his staggering levies to "medicine". But he made a U-turn, pausing most of those tariffs for 90 days after a sharp sell-off in US government bonds. Also known as Treasuries, these have long been seen as a safe investment. But the trade war has shaken confidence in the assets. Trump has since hinted at a de-escalation in trade tensions with China, saying that the tariffs on Chinese goods will "come down substantially, but it won't be zero". So, experts point out, Beijing now knows that the bond market can rattle Trump. China also holds $700bn in US government bonds. Japan, a staunch American ally, is the only non-US holder to own more than that. Some argue that this gives Beijing leverage: Chinese media has regularly floated the idea of selling or withholding purchases of US bonds as a "weapon". But experts warn that China will not emerge unscathed from such a situation. Rather, it will lead to huge losses for Beijing's investments in the bond market and destabilise the Chinese yuan. China will only be able to exert pressure with US government bonds "only up to a point", Dr Zhang says. "China holds a bargaining chip, not a financial weapon." What China can weaponise, however, is its near monopoly in extracting and refining rare earths, a range of elements important to advanced tech manufacturing. China has huge deposits of these, such as dysprosium, which is used in magnets in electric vehicles and wind turbines, and Yttrium, which provides heat-resistant coating for jet engines. Beijing has already responded to Trump's latest tariffs by restricting exports of seven rare earths, including some that are essential for making AI chips. China accounts for about 61% of rare earths production and 92% of their refining, according to estimates by the International Energy Agency (IEA). While Australia, Japan and Vietnam have begun mining for rare earths, it will take years before China can be cut out of the supply chain. In 2024, China banned the export of another critical mineral, antimony, that is crucial to various manufacturing processes. Its price more than doubled amid a wave of panic buying and a search for alternative suppliers. The fear is that the same can happen to the rare earths market, which would severely disrupt various industries from electric vehicles to defence. "Everything you can switch on or off likely runs on rare earths," Thomas Kruemmer, director of Ginger International Trade and Investment,told the BBCpreviously. "The impact on the US defence industry will be substantial."
Five cards China holds in a trade war with the US
TruthLens AI Suggested Headline:
"Analysis of China's Strategic Advantages in Ongoing Trade War with the U.S."
Bbc News
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TruthLens AI Summary
The trade war between the United States and China has escalated significantly, resulting in heavy tariffs imposed by both nations. Chinese exports to the U.S. now face tariffs as high as 245%, while China has retaliated with a 125% levy on American imports. This ongoing conflict has led to widespread uncertainty among consumers, businesses, and markets, with fears of a potential global recession looming. Despite the pressures, Chinese President Xi Jinping's administration has expressed its willingness to engage in dialogue but has also signaled readiness to 'fight to the end' if necessary. The Chinese government has several strategic advantages in this trade war, including its status as the world's second-largest economy, which allows it to better absorb the impacts of tariffs compared to smaller nations. Furthermore, with a population exceeding one billion, China possesses a vast domestic market that could alleviate some pressure on exporters. However, internal consumer spending remains low, prompting the government to implement various incentives to stimulate growth. The Chinese Communist Party is leveraging nationalist sentiments to rally support for its retaliatory measures, emphasizing a united front against U.S. aggression while also addressing existing domestic challenges such as a property crisis and rising unemployment among the youth.
In addition to its economic resilience, China has invested heavily in technological advancements, positioning itself as a formidable competitor to the U.S. in the tech sector. The Chinese leadership has been focused on achieving technological self-sufficiency, pouring billions into sectors such as artificial intelligence, renewable energy, and semiconductor manufacturing. This strategic pivot is evident in China's efforts to enhance its supply chains and reduce reliance on U.S. imports, as seen in the decline of American soybeans in the Chinese market. Moreover, China's control over rare earth materials, essential for advanced technologies, gives it significant leverage in the trade war. Approximately 61% of the world's rare earth production and a staggering 92% of refining capabilities are held by China, making it a critical player in global supply chains. While the U.S. has sought to diversify its supply sources, experts warn that alternatives will take time to develop, and any disruption in rare earth supplies could have substantial repercussions, particularly for industries reliant on these materials. As both nations navigate this complex landscape, it is clear that the trade war is not simply a matter of tariffs; it encompasses broader geopolitical dynamics that will shape the future of global trade.
TruthLens AI Analysis
The article explores the dynamics of the ongoing trade war between China and the United States, highlighting the various strategies China may employ to counteract the tariffs imposed by the U.S. It delves into China's economic resilience, domestic market potential, and the political climate that influences its response to U.S. actions.
Purpose Behind the Publication
The intention of this news piece appears to be to inform the public about the complexities of the trade war and to illustrate China's capabilities in navigating the ensuing economic challenges. By outlining the ways China can absorb the impacts of tariffs, the article may aim to bolster confidence in China's economic stability and resilience amid growing tensions with the U.S.
Perception Management
The article seeks to create a perception that China is not only prepared to withstand the economic fallout from the trade war but is also strategically positioned to leverage its domestic market. This narrative may be intended to reassure both domestic and international audiences that China can endure the pressure without significant long-term damage.
Concealment of Other Issues
While the article emphasizes China's strengths, it may downplay the potential social unrest and dissatisfaction among the Chinese populace due to job losses and a property crisis. By focusing on the government's resilience and strategies, the article could be diverting attention from underlying social issues that could threaten stability.
Manipulative Elements and Credibility
The analysis of the article indicates a moderate level of manipulative language, particularly in how it presents China's potential for overcoming economic challenges. Phrasing that highlights the government's resolve and the nationalistic sentiments can be seen as an effort to rally public support. Nonetheless, the information provided is grounded in observable economic conditions, which lends it a degree of credibility.
Comparative Context
When compared to other articles on the trade war, this piece stands out by focusing more on China's internal strengths rather than the implications for the U.S. economy. This specific angle could suggest a strategic media framing to bolster nationalistic sentiment among readers.
Potential Societal and Economic Impact
The article could influence public sentiment by fostering a sense of national pride and resilience. If consumers and businesses believe in the government's ability to navigate the crisis, they may be less likely to curtail spending, which could mitigate some of the economic impacts of the tariffs. This narrative may also resonate with communities that feel a strong connection to national identity and pride.
Target Audience
The article appears to cater to both domestic Chinese audiences, aiming to bolster nationalistic feelings, and international observers, seeking to understand China's position in the trade war. The framing may appeal to those interested in economic policies and international relations.
Market Reactions
The insights presented in this article could have implications for stock markets and global trade, particularly in sectors heavily impacted by tariffs, such as technology and manufacturing. Investors may react to the perceived stability or instability of China's economy based on the information shared.
Geopolitical Relevance
The article contributes to a broader discourse on the shifting balance of power in global economics. Given the current geopolitical tensions, it underscores the importance of understanding how major economies like China are positioned in the face of adversity.
AI Influence on Writing
It is possible that AI tools were used in crafting the article, particularly in structuring the information and analyzing economic data. The language used to portray China's resilience and the framing of nationalistic sentiments might reflect patterns typically generated by AI models trained on similar economic narratives.
In summary, this article serves to reinforce a narrative of Chinese strength amidst external pressures while subtly managing public sentiment and addressing potential unrest. The overall credibility is supported by factual economic references, but it is also shaped by strategic messaging aimed at specific audiences.