Who will blink first? US and China in a battle of wills over tit-for-tat tariffs

WASHINGTON – Relations between the world’s two largest economies are at a dangerous impasse after China doubled down on its threat to retaliate against US President Donald Trump’s reciprocal tariffs.

It is hard not to see it as a battle of wills between Chinese President Xi Jinping and Mr Trump. Both leaders have for years pursued world-changing goals and have a lot to lose if they are seen as weak by their political constituents.

China reacted within hours to Mr Trump’s threat of escalating tariffs by an additional 50 per cent unless Beijing scraps the retaliatory 34 per cent tariff it announced on US goods last week.

If Mr Trump carries out his threat, China will face a stack of tariffs on April 9: the 50 per cent plus the 34 per cent “reciprocal” tariffs announced by Mr Trump on April 2, coming on top of the 20 per cent already imposed because the White House says China has failed to cooperate in curbing fentanyl trafficking. In total, the tariffs would amount to a whopping 104 per cent.  

But China appeared unfazed. Its Commerce Ministry said on April 8 that it “resolutely opposes” Mr Trump’s threat. 

“The US threat to escalate tariffs on China is a mistake on top of a mistake,” the Chinese statement said. “China will never accept it. If the US insists on its own way, China will fight to the end,” it added.

A “true trade war” is now at hand, said Professor Dennis Wilder, who teaches at the Walsh School of Foreign Service and is a senior fellow in the Initiative for US-China Dialogue on Global Issues at Georgetown University.

And neither Mr Trump nor Mr Xi is likely to back down.

“Both leaders see their leadership being publicly challenged by the other and are loath to be seen backing down in the face of what they both consider challenges to their authority,” said Prof Wilder.

“Trump is insisting that Xi talk directly to him before any trade discussions can begin. Xi is extremely wary of this because of the disrespect of other leaders since Trump took office,” he noted.

“Beijing is also extremely concerned that Trump would characterise any conversation had in a biased and distorted manner on Truth Social,” he added.

Ms Wendy Cutler, vice-president of the Asia Society Policy Institute and former acting deputy US trade representative, said that Mr Trump’s willingness to escalate is clear.

“It mirrors Trump’s tactics of the first term, when US and Chinese tariffs spiralled upward in a tit-for-tat trade war,” she said.

“While the Phase One agreement was instrumental in freezing and in some cases reducing US tariffs, the prospects for a negotiated solution in Trump 2.0 looks a lot more complicated with each passing day,” she added.

During his first term (2017-2021), Mr Trump imposed tariffs that escalated from 25 per cent on US$34 billion (S$45.81 billion) of Chinese goods in July 2018 to more than US$550 billion worth by 2019, with rates mostly at 25 per cent.

China retaliated with tariffs on US$185 billion of US goods, targeting agricultural products like soya beans and pork, as well as industrial products such as automobiles and chemicals. It also restricted the exports of rare earth minerals critical to industries like defence and clean energy.

The two sides in January 2020 reached a “Phase One” deal in which Beijing committed to buy US$200 billion more in US goods and improve intellectual property protections for US firms.

The Chinese procurement, though, eventually fell short of targets. And structural issues such as China’s alleged intellectual property theft and US objections to unfairness stemming from China’s state-led economic model remained unaddressed.

In both nations, citizens suffered. US consumers faced higher costs and farmers needed US$28 billion in bailouts. China mitigated the hit through domestic stimulus and trade redirection.

Global supply chains faced disruptions, while US-China tensions remained high and carried into the Biden administration.

But China is not backing down in Mr Trump’s second term.

Mr William Reinsch at the Centre for Strategic and International Studies said it was not clear at this point if Mr Trump would carry out his threats. Beijing, he added, appeared to have called Mr Trump’s “bluff”. 

“This reminds me of sumo wrestling, two giant parties trying to throw the other one outside the ring,” he said.

The Chinese Commerce Ministry’s reaction was not unexpected, he said. “This seems to be what they usually say, although you could construe it as calling Trump’s bluff,” he added.

“I guess the next move is up to Trump – to either impose additional tariffs or not,” said Mr Reinsch, who served as a member of the congressional US-China Economic and Security Review Commission from 2001 to 2016. “If he does, then we will have to see how China responds.”

Mr Trump raised the ante on April 7, declaring in a post on Truth Social that he would penalise China for defying US tariffs and listing his long-held grievances against Chinese trade practices.

“Yesterday, China issued retaliatory tariffs of 34 per cent, on top of their already record-setting tariffs, non-monetary tariffs, illegal subsidisation of companies, and massive long-term currency manipulation, despite my warning that any country that retaliates against the US by issuing additional tariffs, above and beyond their already existing long term tariff abuse of our nation, will be immediately met with new and substantially higher tariffs, over and above those initially set,” he wrote.

“Therefore, if China does not withdraw its 34 per cent increase above their already long-term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL tariffs on China of 50 per cent, effective April 9th. Additionally, all talks with China concerning their requested meetings with us will be terminated!”