Trump’s Tariff War: Is China Holding the Winning Hand?
China has developed a far more diversified and potent arsenal to counter Donald Trump’s tariff offensive than it had during the first trade war in his earlier term. By Ricardo Martins.
China has quietly spent the past few years refining its trade war playbook—and it may now be better prepared than ever for a rematch with Donald Trump. As Trump gears up for a return to the White House with promises of tougher tariffs, China has emerged more strategically agile, more resilient, and more confident in its capacity to push back.
This isn’t 2018. China is no longer scrambling to respond to tariff shocks—it’s playing a longer game, with smarter tools and deeper partnerships.
What’s in China’s Trade Arsenal?
1. Tariffs—Still a Weapon, But Sharpened
Yes, China retaliates with tariffs—but it’s learned to do so with precision. Instead of mirroring U.S. levies across the board, it targets specific sectors and companies that carry political weight in the U.S.—think agriculture or defence-linked firms.
2. Export Controls: Hitting Where It Hurts
From rare earths to semiconductor-critical metals like gallium and germanium, China now uses its grip on key materials to create bottlenecks for U.S. industries that have no easy alternatives.
3. Blacklists with Bite
The “Unreliable Entity List” used to be a symbolic gesture. Not anymore. U.S. firms like Lockheed Martin, Raytheon, and even consumer brands like PVH (Calvin Klein) now face real restrictions, signalling that China won’t hesitate to weaponise market access.
4. Regulatory Warfare
Blocking mergers and burying deals in red tape has become a strategic play. Take Intel’s failed acquisition of Tower Semiconductor, for instance—scuttled not over competition, but geopolitics. These tactics create an atmosphere of risk and uncertainty for investors.
5. Market Access as a Bargaining Chip
China remains one of the most lucrative consumer markets on the planet. Beijing uses that fact to full advantage, offering access—on its terms. The message is clear: comply, or be sidelined.
6. Financial Restraint & Smart Alliances
This time, China’s not rocking the financial boat. It isn’t devaluing the yuan or dumping U.S. Treasuries. Instead, it’s building deeper trade links across Asia and pushing for more “de-dollarised” trade deals, especially through blocs like RCEP.
Time is on China’s Side
China doesn’t need to win quickly—it just needs to outlast. The longer the confrontation drags on, the more likely U.S. businesses are to get jittery. The bet is that supply chain pain, lost market share, and international fatigue with Trump’s tariffs will eventually work in Beijing’s favour.
China is also playing the long game on tech. With plans like Made in China 2025, it aims to reduce dependence on U.S. technology altogether. That’s not a slogan—it’s policy, investment, and institutional focus.
Europe: A Swing Player in the Trade Chessboard
Europe sits in a tricky position. On one hand, U.S.-China tensions open market opportunities—EU firms can step in where U.S. firms are shut out. On the other, Europe’s own export economy is vulnerable to global trade disruptions.
Crucially, if Trump pressures the EU to “choose sides,” the calculus could change. For now, Brussels is hedging—signing trade deals elsewhere, avoiding alignment with Trump’s hardline posture, and keeping a wary eye on both Washington and Beijing.
What Did We Learn from the First Tariff War?
Global supply chains are fragile.
Strategic autonomy matters.
Multilateralism isn’t dead—but it’s under stress.
Trump's tariff blitz may grab headlines. But China’s response is slower, smarter, and structured to cause enduring discomfort to U.S. firms and institutions. Think erosion, not explosion.
Final Thoughts
Is China holding the winning hand? Perhaps not outright—but it’s holding a better one than in the last round. With a more mature toolkit and a long-term vision, Beijing is turning Trump’s tariffs into a catalyst for deeper self-reliance and global realignment.
And if the U.S. keeps doubling down on economic nationalism, China won’t need to “win”—it only needs to wait.