The US government has gone against the global trend by imposing so-called “reciprocal tariffs” on almost all its trading partners, including China. China may take resolute and forceful countermeasures, which has drawn worldwide attention. At present, it is necessary to objectively analyze the impact of the US’ excessive tariffs on China, rationally view the good momentum of China’s economic development, and firmly maintain confidence in dealing with this round of US suppression.
(1) The excessive imposition of tariffs by the US will have an impact on China, but “the sky won’t fall”. This time, the US government’s imposition of a 34% tariff on China, combined with the previous tariffs, will severely curb bilateral trade. In the short term, it is inevitable that it will have a negative impact on China’s exports and increase the downward pressure on the economy.
However, it should be noted that China is a super-large economy. In the face of the tariff bullying from the United States, China has a strong ability to withstand pressure. In recent years, China has been actively building a diversified market, and its reliance on the US market has been declining. The share of China’s exports to the US in its total exports has dropped from 19.2% in 2018 to 14.7% in 2024. A decline in exports to the US will not have a disruptive impact on China’s overall economy. Many products in the US are highly dependent on China. Currently, the US not only cannot do without China for many consumer goods, but also needs to import many investment goods and intermediate products from China. The dependence on several categories exceeds 50%, and it is difficult to find alternative sources in the international market in the short term. Against the backdrop of the deep integration of global production and supply chains, it is impossible for Sino-US trade to be completely interrupted. The potential for economic and trade cooperation in emerging markets is huge and is increasingly becoming an important foundation for China to stabilize its foreign trade. China is the main trading partner of more than 150 countries and regions around the world. Since 2018, China’s exports to ASEAN have increased from 12.8% to 16.4%, and its exports to the countries along the Belt and Road Initiative have increased from 38.7% to 47.8%, maintaining a relatively fast growth momentum. The domestic market has a broad buffer space and serves as an important rear base. According to statistics, among the hundreds of thousands of Chinese enterprises with export performance in 2024, nearly 85% also conduct domestic sales, and the amount of domestic sales accounts for nearly 75% of the total sales. China is accelerating the removal of policy obstacles and bottlenecks for “export to domestic sales” and expanding domestic demand policies are also being intensified and expanded. The accommodating effect of the domestic market will increasingly be manifested.
(2) China’s economy is currently stabilizing and improving, and it has the confidence and strength to deal with the tariff shock from the US. Since the US initiated the trade war against China in 2017, no matter how hard the US has hit and pressured China, China has maintained its development and progress, demonstrating a resilience of “the harder it is pressed, the stronger it becomes”, which is China’s greatest confidence in dealing with external shocks. The economic cycle is constantly improving. In recent years, China has continuously optimized supply and demand, smoothed domestic economic circulation, and significantly enhanced its internal growth momentum. Especially after the Central Political Bureau meeting on September 26, 2022, with the implementation of a series of incremental policies, the domestic economy has continued to recover and improve. In the first two months of this year, domestic demand such as investment and consumption grew better than expected, exports initially withstood the test, and the PMIs of manufacturing and services continued to rise. It is expected that the growth rate in the first quarter will exceed 5%. The empowerment of science and technology is continuously strengthening. China has seized the development of new productive forces as the most important supply, insisting on driving industrial innovation through scientific and technological innovation, achieving multiple breakthroughs in fields such as integrated circuits, artificial intelligence, and humanoid robots, demonstrating the huge vitality of China’s scientific and technological innovation. “Strangling” and suppression will only force China to accelerate the breakthrough of core technologies in key areas. The effect of risk mitigation is obvious. In recent years, China has withstood internal and external pressures, persisted in doing difficult but correct things, and continuously defused risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions. Currently, positive changes have occurred in the real estate market transactions and social confidence, with a more obvious recovery trend in first-tier cities. Expectations from all sides are constantly improving. China’s long-term stable social environment, continuously optimized business environment, and the policy continuity of adhering to goals without relaxation and implementing plans consistently provide enterprises with long-term stable expectations. Since the beginning of this year, the views on China’s economic prospects at home and abroad have significantly improved. International organizations such as the Organization for Economic Cooperation and Development and many Wall Street financial institutions have raised their predictions for China’s economic growth, are optimistic about China’s capital market, and regard China’s “certainty” as a safe haven to hedge against the “uncertainty” of the US.
(3) In the face of the US’ wanton imposition of tariffs, China is well-prepared and has effective countermeasures. China has been engaged in a trade war with the US for eight years and has accumulated rich experience in the struggle. Although the international market generally believes that the US’ wanton imposition of tariffs is beyond expectations, China has made predictions about the US’ implementation of a new round of economic and trade suppression and has fully estimated the possible impact. The advance and surplus of the response plan have also been well prepared. Last year’s China Economic Work Conference made comprehensive arrangements on how to deal with the US’ new round of containment and suppression against China, emphasizing the need to enrich and improve the policy toolkit, dynamically adjust policies based on the degree of external influence, strengthen unconventional counter-cyclical regulation, and enhance the foresight, pertinence and effectiveness of macro-control. At this year’s Two Sessions in China, many policies introduced, such as setting the fiscal deficit rate for this year at around 4% and using treasury funds to expand support for key areas, are concrete manifestations of unconventional policies.
In the future, based on the evolving situation, there is ample room for adjustment in monetary policy tools such as reserve requirement ratio cuts and interest rate reductions, which can be introduced at any time. Fiscal policy has been clearly stated to increase spending intensity and accelerate spending progress. There is still room for further expansion of fiscal deficits, special bonds, and special treasury bonds as circumstances warrant. China may take extraordinary measures to boost domestic consumption, accelerate the implementation of established policies, and introduce a batch of reserve policies in a timely manner. China may also take concrete and effective measures to firmly stabilize the capital market and restore market confidence. Relevant contingency plans and policies will be rolled out successively. Chinese governments at all levels will provide precise assistance to industries and enterprises that have been severely impacted on a case-by-case basis, support enterprises in adjusting their business strategies, and guide and help them maintain trade with the United States as much as possible while exploring domestic and non-US markets. At the same time, China will urge the US to correct its wrongdoings and engage in consultations with China and other countries in an equal, respectful, and mutually beneficial manner to properly resolve trade disputes.
(4) It is widely believed that China will remain committed to doing their own things well and respond to the changes in the external environment by adjusting the domestic economic structure. The world is undergoing profound changes unseen in a century, and the US tariff policy has further increased the uncertainty in the global political and economic landscape. As a responsible global power, China should turn pressure into motivation and view the US’ challenges as a strategic opportunity to accelerate the formation of a new development pattern, promote high-quality development and economic restructuring. China will inject more stability into the global economy through their own stable development. In the face of the high tariffs that have continuously compressed the trade space with the US, China should take expanding domestic demand as a long-term strategy, strive to make consumption the main driver and stabilizer of economic growth, and leverage the advantage of its huge market. On the one hand, China may start from the demand side and steadily increase residents’ income and reduce their burden to enhance their consumption capacity and willingness. On the other hand, China should focus on the supply side, accelerate the building of a unified national market, improve the business environment and support domestic enterprises in providing more high-quality products and services that meet the needs of the people.
In the face of the US side’s capriciousness and extreme pressure, China has not closed the door to negotiations, but it will not count on luck either. Instead, it has made all kinds of preparations to deal with the impact. China’s economy is like a vast ocean, not a small pond. This ocean can withstand the test of violent storms and the invasion of trade cold waves, and will eventually show the world its composure and determination of “embracing all rivers”.