On the basis of Napoleon’s dictum “never interrupt your enemy while they are making a mistake”, there was a large incentive for China to do precisely nothing as Donald Trump displayed his determination to lose friends and induce market panic. Indeed, the Chinese advocates of passivity cited a social media meme attributed to President Xi Jinping: “Do nothing. Win.”
Initially it was tempting for China to sit back and watch the US’s former allies recoil at Trump’s disruptive war on globalisation and let them realise that, by comparison, China represented an oasis of stability, modernity and predictability.
China instead decided to be far from idle. It foresaw and prepped for this trade war, probably more so than for Trump’s first term, and decided that if the US president imposed on China the kind of tariffs he had suggested on the campaign trail, it would have to mount a counterattack. China insisted its wider-than-expected and swiftly executed package of reprisals, initially set at 34% but increased to 84% in response to Trump’s tariffs, was a justifiable retaliation.
Even now, with lines of communication into Washington limited, China says it had no desire for this confrontation, but was forced to react after the scale of Trump’s assault. And by making an appeal to the World Trade Organization (WTO), it seeks to project itself as a defender of rules-based trading order. Why, after all, would China favour such a trade war? Trump’s initial tariffs were predicted to cut as much as 2.4 percentage points off China’s growth.
By Wednesday night, war was being waged by both sides with every weapon in the field in a crazed and self-destructive bidding war. China’s retaliatory tariffs on the US sat at 84%, with the US’s even higher at an oxygen-free 125%. At these figures there could be virtually no trade between the two world’s largest economies and a complete decoupling would begin.
The WTO warmed: “This tit-for-tat approach between the world’s two largest economies, which together account for roughly 3% of global trade, carries wider implications that could severely damage the global economic outlook.”
China’s diplomatic goal of portraying itself as the innocent victim has been made more complex by Trump belatedly trying to reframe the trade war by suspending tariffs on most other countries to 10% for 90 days, leaving China exposed as the US’s prime target.
What began as a generalised American assault on the trading system, an assault that seemed sure to crash the US bond market, infuriating American allies in Europe and Asia and crushing developing economies, has become a more narrowly focused attack on China.
Trump’s aides tried to cover the tracks of this retreat by saying the isolation of China was the plan all along and the suspension was due to many countries wanting to negotiate new trade deals that would prove advantageous to the US. Those negotiations will, in theory, also provide a chance to press third countries from being Chinese export platforms.
But Trump undercut the theory of a well-executed master plan by admitting the bond markets had become a bit “yippy”. In pulling back under pressure, he has probably alighted on a more defensible position that he could have adopted at the outset.
Trump’s critics will not thank him, accusing him of recklessly endangering the world economy in pursuit of the mirage of a revival of a 19th-century US manufacturing economy. What investor is going to put serious funds into a US factory when its prospects are dependent on a president who apparently sees tariffs as a political weapon to be unloaded on social media at will?
Moreover, an insurmountable tariff wall between the world’s two largest economies remains and is unsustainable. The US is dependent on China for 73% of its smartphones, 78% of its laptops and 87% of its video game consoles.
China, insisting it will fight to the end, will now have to judge whether it has the firepower to withstand a trade war or find a way to open talks. Since Trump’s first term, the US share of Chinese exports dropped from 19.2% to 14.7%, partly as it diversified through investments elsewhere into the “connector” economies of Asia. But the loss of 15% of China’s export market is still crippling.
China has already launched a diplomatic charm offensive of sorts, with senior officials from the international department recently touring European and Asian capitals, reminding all those who will listen that China is an oasis of responsibility and a believer in genuine multilateralism.
A slick Chinese ministry of foreign affairs video shows how the world faces two choices: the chaos represented by Trump, or the spirit of cooperation offered by China. Another video targets US Republicans by highlighting Ronald Reagan’s opposition to tariffs. And the description of the Chinese as peasants by the US vice-president, JD Vance, leaves even the most ardent China sceptics exasperated.
For the moment, the Chinese script writes itself: China is the reliable partner, not the US, with the EU trade commissioner, Maroš Šefčovič, urged on his visit to Beijing last week to make common cause to stop Trump’s unilateral bullying.
There is now a question whether Europe and China can set aside their differences about Chinese trade practices and overcapacity and form an alliance against American disruption.
It’s early days, but China, if it gets its messaging right, could find a receptive audience. What has been described as the great reshoring of American jobs and wealth by the White House adviser Stephen Miller, also risks being the great offshoring of American power.
China’s charm offensive was first on view at the Munich Security Conference in February when its foreign minister, Wang Yi, called for “an equal and orderly multipolar world”, while JD Vance unleashed his volley against European elites.
Gabrielius Landsbergis, the former Lithuanian foreign minister, recalls: “China was very active, very supportive and very understanding of European security needs. And later on, when Europe was not invited to Riyadh for the talks on Ukraine, the Chinese reaction was that it’s imperative for Europe to sit at the table.
“So they are striking all the right notes, for at least the part of Europe that is really, really worried. I think they are playing the smart, subtle game, much like what Henry Kissinger played in the Soviet Union and China in the 70s. Whether they will be successful, I’m not sure.”
In recent weeks, Spain and France have been beating a path towards Beijing’s door. The Spanish prime minister, Pedro Sánchez, is in Beijing on his third visit in two years, and has called for closer trade ties with China as part of an effort to diversify away from the US. He will try to seal lucrative Chinese investment in Spain’s electric car and battery industry.
The European Commission’s president, Ursula von der Leyen, spoke with the Chinese premier, Li Qiang, for the first time this week since starting her second term in office in December. The pair defended free trade and agreed to host an EU-China summit in July, although it was not clear whether Xi Jinping will attend.
There are strict limits on a new European-Chinese relationship, partly due to China’s inflexibility. China’s lenience towards Russia over Ukraine is a huge political barrier. The EU has long seen China’s handling of the Ukraine issue as a test of its credentials as a world power. The EU’s former external affairs minister Josep Borrell said: “China cannot pretend to be a great power but close its eyes or cover its ears when it comes to a conflict that obviously makes it uncomfortable.”
A visit to Beijing by the French foreign minister, Jean-Noël Barrot, on 29 March failed to budge China from its defence of Moscow. Chinese officials say they accept the sanctity of borders and the UN charter, but in practice will do nothing to stop Russia breaching those principles.
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Asked about human rights, or a totemic issue such as the release of the 77-year-old former Hong Kong media magnate Jimmy Lai, Chinese officials give no ground.
Nor is there any sign that China is willing to relent over Europe’s other political concern, Taiwan. If anything, the chaos, including the collapse of the Taiwan stock market (Taiwan suffered its worst one-day fall this week since 1990), makes Taiwan look more vulnerable than ever.
Šefčovič told EU trade ministers on Monday that there was no easy compromise between Brussels and Beijing on trade either. The risk of China, faced with huge US tariffs, flooding European markets with cheap goods is self-evident, and extra EU surveillance measures are in place.
The problem is real. China’s exports to the EU exceeded imports from the bloc by more than €300bn in 2024, according to EU data, a gap that is roughly twice as large as when Trump first started imposing tariffs in 2018.
In condemning the imposition of US tariffs, the commission also accepted Trump’s view that there were some countries that traded unfairly, a reference to China.
Research published this week by the Rhodium group shows a clear correlation between rising Chinese imports into Europe and declining European production. The mix of China’s high overcapacity – and falling prices – on the one hand, and Europe’s rising energy costs on the other is dangerous, the report warned.
Collectively, the industries experiencing rising imports from China and falling production in the EU account for 25% of Europe’s manufacturing jobs.
These high tariffs, combined with weakened US consumer demand, could lead Chinese exporters to further reduce their prices, incentivise Beijing to let the renminbi depreciate and drive a shift in trade as Chinese exports are redirected toward alternative markets. Other countries are also likely to tighten their own trade barriers in response, meaning if Europe is slow to act, it risks becoming the de facto dumping ground for surplus Chinese production.
In Asia, China may find it easier to locate allies. Jayant Menon, a senior fellow at the Yusof Ishak Institute in Singapore, said: “The uncertain and erratic nature of US trade policy is forcing countries to consider de-risking, not from China, but from the US. In a strategic sense, China is a beneficiary of this bizarre trade policy.”
Evan Feigenbaum, a former US assistant secretary of state, argues the three key pillars of US influence in Asia flowed from being a standard setter, security provider and by being an economic demand driver, but all three of these positives are eroding.
He said: “A shrinking, relative demand profile, withdrawal from rule-setting pacts, zeroing out foreign aid, capricious visa policies and now a tariff wall erected against Japan, Laos, Vietnam, Indonesia, Taiwan, Thailand, the Republic of Korea and Cambodia all contribute.
“The region is filled with pragmatists who can and do navigate all kinds of crazy stuff from outside powers, but that depends greatly on those players being either principled or strategic, and Washington is now neither.”
Japanese officials spoke of trying to lobby Trump being equivalent to trying to influence an opaque dictatorship. “No matter who I talk to in the US administration, none of them knows what Trump is thinking,” a senior Japanese government official said. “We don’t even know what Trump wants to negotiate on.”
China sees an opportunity. Its commerce minister, Wang Wentao, last week met his Japanese and South Korean counterparts for the first time in five years “to strengthen supply chain cooperation, engage in more dialogue on export controls and deepen collaboration in the digital and green economies”, the Xinhua news agency reported.
The three east Asian countries also agreed to resume negotiations on a trilateral free trade agreement that has been on hold since 2019.
Xi will visit Vietnam, Malaysia and Cambodia later this month, three countries clobbered under Trump’s original tariffs. The message from Beijing will be that China is now not just geographically at the centre of Asia, but also a reliable trading partner.
But the Chinese president will have to tread a careful path. Vietnam, for example, so dependent on exporting to the US, would resent being dragooned against its national interest into what it sees as a bilateral conflict between two superpowers: China and the US.
Nor does China feel ready to supplant the US. Ryan Hass, from the Brookings Institute, speaking to the Sinica podcast, said: “Some people see this as a giant opportunity for China, to expand its footprint round the world. Maybe.
“They feel this is a structural issue that is not going to resolve itself anytime soon. Their view is to make a virtue of necessity – to use the pressure that President Trump is providing to advance and accelerate their own pre-existing plans, whether it is on self-reliance, more investment, diversifying trade relationships. They are trying to use the pressure from Trump to propel their own plans forward rather than fight him on every issue on every single day.”
