For US and China, a risky game of chicken with no off-ramp in sight

Boston Globe

10-04-2025

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China's new tariffs, which will take effect Thursday, mean all American goods shipped to China will face an additional 84 percent import tax. On Wednesday afternoon, Trump retaliated, raising tariffs on Chinese exports to 125 percent. Both figures would have been unimaginable a few weeks ago.
With China's top leader, Xi Jinping, and Trump locked in a game of chicken -- each unwilling to risk looking weak by making a concession -- the trade fight could spiral even further out of control, inflaming tensions over other areas of competition such as technology and the fate of Taiwan, the self-governing island claimed by Beijing.
Trump's bare-knuckle tactics make him a singular force in US politics. But in Xi, he faces a hardened opponent who survived the turmoil of China's late-20th-century political purges, and who views the United States' competitive tactics as ultimately aimed at subverting the ruling Communist Party's legitimacy.
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'Trump has never gone into a back-alley brawl where the other side is willing to brawl and use the same kind of tactics as him,' said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies, a Washington think tank. 'For China, this is about their sovereignty. This is about the Communist Party's hold on power. For Trump, it might just be a political campaign.'
China's economy, which was already in a vulnerable state because of a property crisis, now faces the specter of a global recession and a devastating slowdown in trade, its defining industry and main driver of growth. In a sign of Beijing's growing unease, Chinese censors appeared to be blocking social media searches of hashtags that referred to the number 104, as in the size of the US tariffs before Trump's latest announcement.
'This is a huge shock to the China-US economic relationship, like an earthquake,' Wu Xinbo, dean of the Institute of International Studies at Fudan University in Shanghai, said of the tariffs imposed Wednesday. 'It remains to be seen if this is temporary turmoil or a long-term unavoidable trend.'
To be sure, a US-China decoupling is still far from becoming reality. Chinese and American companies such as TikTok and Starbucks are both still entrenched in each other's countries. And Chinese banks remain hitched to the US dollar-dominated financial system.
China and the United States are still at the brinkmanship stage, Kennedy said, each trying to force the other to offer a deal on bended knee. But the spat could become more dangerous if the Trump administration goes after Chinese financial institutions -- for instance, by rescinding the licenses of Chinese banks in the United States or booting them off the international payments system SWIFT.
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In pushing back against Trump's moves, Beijing has cast itself as a victim of unfair US trade practices and protectionism. The irony is that China has done the same, if not worse, over the decades by limiting foreign investment and subsidizing Chinese firms.
Xi himself has made no direct comment about the latest US tariffs. On Wednesday afternoon, though, shortly after they took effect, Chinese state media announced that he gave a speech in a meeting with the other six members of the Politburo Standing Committee, the apex of power in China, as well as other top officials. In it, Xi called on officials to bolster ties with China's neighbors and 'strengthen industrial and supply chain cooperation.'
A spokesperson for China's Foreign Ministry, Lin Jian, did address the new tariffs, saying Wednesday that China would 'never accept such arrogant and bullying behavior' and would 'definitely retaliate.' The new tariffs were announced hours later.
Any fracture between the Chinese and American economies will be felt across the world. Business was the bedrock of the bilateral relationship for nearly five decades. Without it, their engagement on other global issues, such as security, climate change, and future pandemics and financial crises, would likely stall.
China has tried to downplay its vulnerability to the economic chaos unleashed by the Trump administration. It says it has reduced its reliance on US markets for its exports and that its economy is getting more self-sufficient, especially when it comes to developing homegrown technologies.
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But that papers over serious problems in the Chinese economy, which has been largely stagnant because of a collapse in the property market. Moreover, Trump's assault on the global trading system, which includes targeting countries such as Vietnam where Chinese companies had opened factories to circumvent earlier US tariffs, strikes at the core of one of China's only current economic bright spots.
The fallout from the trade disruption will hurt the United States, which relies on China for all sorts of manufactured goods, but will do more damage to China, said Wang Yuesheng, director of the Institute of International Economics at Peking University.
'The impact on China is mainly that Chinese products have nowhere to go,' Wang said. That will ravage export-oriented companies making things such as furniture, clothing, toys, and home appliances along China's eastern seaboard, which largely exist to serve American consumers.
Beijing's strategy now is to push back at the United States and hope Trump succumbs to domestic pressure to reverse course, said Evan Medeiros, a professor of Asian studies at Georgetown University who served as an Asia adviser to former president Barack Obama.
'They know that if they give in to pressure they will get more pressure,' he said. 'They will resist it with the belief that China can withstand more pain than they can.'
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