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Home World News Africa

Trump’s tariff war: What’s at stake for China’s economy?

April 9, 2025
in Africa
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It’s started.

At 12.01am EST (04:01 GMT) on Wednesday, United States President Donald Trump’s “reciprocal” trade tariffs kicked in. And no country has been hit worse than China, which now effectively faces a 104 percent levy on the goods it sells to the US.

Even as Washington moved to start negotiations with other trading partners targeted by tariffs, the new levies on Beijing mean that anything the US imports from China will cost more than double what it did two months ago. In response, China quickly raised its US tariffs to 84 percent.

Stock markets have nosedived since last week’s announcement of US tariffs on dozens of countries, as investors braced for the fallout from what is now a global trade war.

For his part, Trump has long accused other countries – especially China – of exploiting the US on trade, casting his protectionist agenda as necessary to revive domestic manufacturing and re-shore American jobs.

What is the status of US-China tariffs?

On February 3, Trump imposed an extra 10 percent tariff on all goods from China, on top of various tariffs levied during the first Trump administration in 2017-2021 and the administration of former US President Joe Biden in 2021-2025.

Then, on March 5, Trump doubled the rate on Chinese imports to 20 percent. On April 2, he lifted it again by another 34 percent – stacking up to 54 percent in total.

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

Trump raised the temperature again by threatening still more tariffs unless Beijing withdrew its levies on US goods.

“If China does not withdraw its 34 percent increase above their already long-term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” Trump said on his Truth Social platform on Monday.

As the hours ticked away, Trump remained confident that Beijing would buckle. “China also wants to make a deal, badly, but they don’t know how to get it started,” the US president wrote in a social media post. “We are waiting for their call. It will happen!”

It didn’t. Instead, Beijing raised its tariff on US goods to 84 percent on Wednesday.

What has China said in response to Trump’s tariffs?

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

“History and facts have proven that the United States’ increase in tariffs will not solve its own problems,” said the policy statement.

“Instead, it will trigger sharp fluctuations in financial markets, push up US inflation pressure, weaken the US industrial base and increase the risk of a US economic recession, which will ultimately only backfire on itself.

In a statement the previous day, on April 8, the Ministry of Commerce also made combative overtures, saying Washington’s actions were​ “completely groundless” and a form of economic “bullying”.

Beijing defended its reciprocal tariffs and said they were aimed at safeguarding China’s “sovereignty, security and development interests”, as well as maintaining a balanced international trade market.

Elsewhere, China’s Foreign Ministry spokesperson Lin Jian said “We Chinese are not troublemakers, but we will not flinch when trouble comes our way.”

How will tariffs impact China’s economy?

Despite growing tensions between the US and China, Washington and Beijing remain major trade partners.

According to the Office of the United States Trade Representative, America imported $438.9bn in Chinese goods last year.

That amounts to roughly 3 percent of China’s total gross domestic product (GDP), which is heavily reliant on exports.

In a report shared with clients on Tuesday, Goldman Sachs said it expects Trump’s latest tariffs would drag down China’s GDP by as much as 2.4 percent.

The investment bank is forecasting 4.5 percent growth for this year, citing concerns that China’s proven tactic of rerouting exports through countries like Vietnam and Thailand – to bypass US tariffs – will become less effective now that Trump has erected trade barriers globally.

That 4.5 percent is lower than the Chinese government’s official growth target of 5 percent for 2025.

Analysts at UBS are even more pessimistic: They’ve said that Trump’s tariff hikes could reduce China’s economic growth rate to just 4 percent in 2025. And that’s assuming the government engages in “broad fiscal expansion” [i.e. extra public investment].

China’s economy has already been growing at a slower pace than when Trump first took office. The latest trade war comes as China is struggling with deflation, a crisis-stricken property market and elevated debt levels.

In 2018, when Trump launched his first trade war against China, Beijing’s official GDP growth figure was 6.6 percent.

Still, for Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst, China is still “better prepared than most countries” to handle the fallout from Trump’s trade salvoes.

How has Beijing responded so far?

Al Jazeera’s Beijing correspondent Katrina Yu says Chinese officials are working to guard against shocks in the stock market.

“The government does have the ability to intervene strongly,” Yu said.

On Tuesday, China’s Premier Li Qiang said that the government is “fully capable of hedging against adverse external influences”.

The same day, several public investment firms – such as Chengtong and Huijin – vowed to increase equity investments and stem financial market selloffs.

Yu noted that Chinese stock exchanges have performed better than elsewhere in Asia.

Shanghai’s SSE Composite Index posted gains of 1.1 percent on Wednesday, while Shenzhen’s SE Composite rose 2.2 percent. Meanwhile, Japan’s Nikkei index closed down by 3.9 percent.

“The [Chinese] government is really looking to stabilise the stock market. It seems to be working so far, but investors here … some of them are still very anxious,” Yu said.

What will China do next?

To mitigate the impact from tariffs, Beijing will probably focus on domestic stimulus and boosting ties with its trading partners to achieve a growth target of “around 5 percent,” said Ghosh, the economics professor.

“I expect further reductions in China’s [already] low interest rates along with more borrowing by local governments and assistance for affected export workers,” she told Al Jazeera.

Ghosh suggested that China would “quietly” boost exports to trading partners, particularly in the Global South, through measures like “loans and debt relief.”

She also said China’s central bank might allow the yuan to depreciate, thereby lowering export prices and offsetting some of losses from tariffs.

Though Ghosh said that China’s $20 trillion economy “should be able to absorb” the hit from US tariffs, some economists have expressed concern about Beijing’s fiscal position.

On April 3, Fitch ratings agency Fitch downgraded China’s sovereign credit rating, citing rapidly rising government debt and risks to public finances, as policymakers gear up to shield the economy from rising tariffs.

For Ghosh, however “there is a western tendency to see the imminent collapse of the Chinese economy. I’m far more concerned about the US economy,” she said.



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Tags: ChinaDonald TrumpExplainerInternational TradeNewstrade war
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