President Donald Trump is strongly pressuring China with a total tariff bomb of 104%, but China still shows no signs of entering negotiations. Analysts suggest that China's ability to withstand against the U.S. is partly due to the characteristics of its one-party communist rule. It is said that since societal unrest can be easily controlled, Trump, who is vulnerable to public opinion, may have the luxury of waiting for a surrender.
At 12:01 a.m. on the 9th (local time), the mutual tariff on Chinese imports in the United States officially took effect, increasing from 34% announced on the 2nd to 84%, an increase of 50 percentage points. As a result, China will have to pay a total tariff of 104%, including the 20% tariff imposed from February to March. Trump's increase of the mutual tariff on Chinese imports comes as China stated it would impose a 34% 'retaliatory tariff' on U.S. imports starting on the 10th. White House Spokesperson Caroline Levitt noted in a briefing the day before, 'If hit, the U.S. hits back harder.'
The U.S. proposes that China initiates 'prior contact' to resolve the intense tariff conflict. Levitt said, 'If China reaches out for negotiations, the president would be unbelievably generous.' However, there are still no signs from China. The day before, despite Trump's warning that he would raise the mutual tariff by 50 percentage points, China’s Ministry of Commerce issued a message stating, 'China will definitely stand firm to the end.' This also shows that China is preparing for a prolonged battle by mobilizing sovereign wealth funds and state-owned enterprises to flood the stock market, which has plummeted due to the trade war, and allowing a weak exchange rate.
One reason China can respond directly against the U.S. is largely due to the characteristics of its political environment. China operates under a one-party communist rule, enabling social control through government organizations and the media. Therefore, although the trade war with the U.S. inevitably disrupts China’s national economy, the likelihood of societal unrest escalating, such as nationwide protests like in the U.S., is low. In other words, with next November’s midterm elections replacing the entire House and one-third of the Senate, Xi Jinping is in a more advantageous position than Trump.
Gabriel Wildo, managing director at the U.S. consulting firm Teneo, stated to the Hong Kong South China Morning Post that 'China's strong apparatus for maintaining political and social stability, even amid economic difficulties, is another source of confidence.' The British Economist also noted that 'Chinese officials believe the U.S. will not be able to handle the inflation and economic discontent caused by Trump's tariffs,' stating that 'rather than fighting to the end, it might only need to fight until U.S. consumer prices rise or employment begins to decline, and all high-ranking advisers and government researchers and economists point out that this is the easiest way to bring Trump to the negotiating table.'
The increasing tariffs imposed by the U.S. also contribute to China’s motivation to respond decisively. According to an analysis by Goldman Sachs, the initial imposition of a 50% tariff reduces China's gross domestic product (GDP) by 1.5 percentage points, but the impact of the subsequent 50% tariff drops to 0.9 percentage points. Ding Shuang, chief economist for China and North Asia at Standard Chartered, said to Bloomberg, 'When tariffs are raised to about 65%, the marginal effect will diminish,' adding that 'most Chinese exports have already been affected, and for products that are not sensitive to price, raising tariffs will have no effect.'
The crucial question is whether China is prepared to go so far as to completely decouple from the U.S. The Economist explained that 'China has been striving for technological independence, but the concept of 'decoupling (supply chain separation)' has been seen as a method for the West to punish China and has been rejected,' while noting that 'support for this (supply chain separation) is now growing.' The People's Daily, the communist party's official newspaper, stated on the 7th, 'We must acknowledge that China is a massive economy,' adding, 'In recent years, we have actively established a diversified market to reduce our dependence on the U.S.' The day before, state-run Xinhua News Agency also unveiled 'six retaliatory measures,' including sharply increasing tariffs on U.S. agricultural products such as soybeans and millet, banning imports of U.S. poultry, and restricting U.S. service trade with China.
However, there are also speculations that the leaders of the two countries may soon sit at the negotiating table. Trump remarked at a Republican National Congressional Committee (NRCC) dinner the day before in Washington, D.C., 'At some point, China will also have to negotiate,' continuously pressuring Xi Jinping. China remains open to dialogue. China's Ministry of Commerce stated, 'China urges the U.S. to immediately correct its wrong approach, abolish all unilateral tariffs against China, cease economic and trade repression, and properly resolve differences through equal dialogue based on mutual respect with China.' The official Chinese Central Television (CCTV) operated social media account 'Yuyuantantian' also emphasized this position of the Ministry of Commerce, stating, 'We certainly have not closed the door to negotiations, but it must not be under such (the current U.S.) approach.'