Trade tensions between China and the United States (US) continue to escalate. This is due to the exchange of tariffs between the two countries, which are feared to disrupt global trade.

US President Donald Trump announced reciprocal tariffs of up to 125% on Chinese goods on Wednesday (April 9, 2025). This follows Beijing's imposition of tariffs on US goods of up to 84%.

Trump himself has long accused other countries, particularly China, of exploiting the US in trade. He views his protectionist agenda as necessary to revive domestic manufacturing and bolster American jobs.

History of the US-China Tariff War

On February 3, Trump imposed an additional 10% tariff on all Chinese goods. Then, on March 5, Trump doubled the tariff on Chinese imports to 20%. On April 2, he raised it again by 34%, bringing the total to 54%.

Last Friday, on April 4, China announced a 34% reciprocal tariff on US imports.

Trump then raised the temperature again by threatening to impose higher tariffs unless Beijing rolled back its levies on US goods.

"If China does not roll back its 34% tariff increase on top of its long-standing trade violations by tomorrow, April 8, 2025, the United States will impose an ADDITIONAL 50% Tariff on China, effective April 9th," Trump said on his Truth Social platform on Monday. With the additional tariffs, the tariff on Chinese imports jumps to 10%.

As time went on, Trump remained confident that Beijing would give in. "China is also eager to make a deal, but they don't know how to get started," the US president wrote in a social media post. "We're waiting for their call. It will happen!"

But that didn't happen. Instead, Beijing raised its tariffs on US goods to 84% on Wednesday. Hours later, Trump retaliated again, raising tariffs on China even further, now to 125%.

China's response

Announcing its latest round of tariffs on US exports on April 9, China's Ministry of Commerce said that Beijing "has firm determination and abundant means to take necessary countermeasures and fight to the end."

"History and facts have proven that US tariff increases alone will not solve the problem," the policy statement said.

"On the contrary, it will trigger sharp fluctuations in financial markets, increase US inflationary pressures, weaken the US industrial base, and increase the risk of a US economic recession, which will ultimately only backfire."

In a statement the previous day, on April 8, China's Ministry of Commerce also took a more aggressive approach, saying Washington's actions were "completely groundless" and a form of economic "bullying."

Beijing defends its reciprocal tariffs, saying they are aimed at safeguarding China's "sovereignty, security and development interests," as well as maintaining a balanced international trade market.

Elsewhere, Chinese Foreign Ministry Spokesperson Lin Jian said "We Chinese are not troublemakers, but we will not be cowed when trouble comes our way."

The Impact of Tariffs on the Chinese Economy

Despite rising tensions between the US and China, Washington and Beijing remain major trading partners. According to the Office of the US Trade Representative, the US imported US$438.9 billion (Rp 7,396 trillion) worth of Chinese goods last year.

That's equivalent to about 3% of China's total gross domestic product (GDP), which relies heavily on exports. In a report shared with clients on Tuesday, Goldman Sachs said it estimates Trump's latest tariffs will drag down China's GDP by up to 2.4%.

Analysts at UBS are even more pessimistic: They say Trump's tariff hikes could reduce China's economic growth rate to just 4% by 2025. That's assuming the government engages in a "broad fiscal expansion," that is, additional public investment.

China's Next Steps

Jayanti Ghosh, a professor of economics at the University of Massachusetts Amherst, said Beijing will likely focus on domestic stimulus and improving relations with its trading partners to achieve its growth target of around 5%.

"I expect further cuts in China's already low interest rates along with more lending by local governments and aid for affected export workers," he told Al Jazeera .

Ghosh suggested that China would "quietly" increase exports to trading partners, particularly in the South, through measures such as "loans and debt relief." He also said China's central bank might allow the yuan to depreciate, thereby lowering export prices and offsetting some of the tariff losses.

On April 3, ratings agency Fitch downgraded China's credit rating, citing rapidly rising government debt and risks to public finances, as policymakers prepare to protect the economy from tariff increases. However, for Ghosh, the potential for economic collapse could be even more dire in the US.

"I'm much more worried about the US economy," he said.

Source: CNBC Indonesia

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