Investing.com -- Donald Trump’s latest tariff escalation against China—raising rates to as high as 145%—was meant to corner Beijing. But so far, the strategy appears to be misfiring, raising a question of whether China really needs America as much as Trump thinks.
“Team Trump assumed that sticker shock would have Xi calling the White House switchboard in a panic to make a deal. Yet no call came to Washington,” Yardeni Research said in a note.
Instead, Beijing called Tokyo, Seoul, and other Asian capitals, accelerating trade diversification efforts that began during Trump’s first term.
William Pesek, a contributing editor to Yardeni Research, argues that China has reduced its dependence on the U.S. consumer and is instead betting that the pain of decoupling will be greater for America.
The biggest miscalculation by Trump 2.0 may be taking China’s secret weapon for granted: an economy that’s been relying less and less on the U.S. consumer to reach its 5% annual real GDP growth targets,” he writes.
Only 14.7% of Chinese exports went to the U.S. by the end of 2024, down from 19.2% in 2018.
China’s ability to endure economic pressure also stems from its political structure. The Chinese concept of “chiku,” or eating bitterness, gives Xi Jinping an advantage U.S. leaders lack.
Unlike Western politicians, Xi doesn’t face elections or credible opinion polling. This tolerance for hardship, honed during strict COVID-19 lockdowns, is now being channeled into portraying China as the victim of U.S. aggression.
In response to tariffs, Beijing retains significant policy tools. The People’s Bank of China could cut interest rates, launch a form of quantitative easing, or direct liquidity straight to households.
Beijing has also yet to deploy its full stimulus “bazooka,” which could include a multi-trillion-yuan package to stabilize the housing market and boost consumer demand.
For China, trade diversification is already paying off. By 2024, the ASEAN bloc had surpassed the U.S. as China’s top trading partner.
China has also become the largest trading partner for 60 countries, about double that of the U.S., according to the Lowy Institute. Meanwhile, Washington’s reliance on Chinese-made goods remains high—even if routed through countries like Vietnam.
“Trump World is learning the hard way that China has a deep well of strategies it can use to wait out the trade war,” Yardeni’s report states. The question may no longer be whether China needs the U.S.—but whether the U.S. can afford to test how little China needs it.
“Our point is simply that Trump’s confidence that he can drive China’s economy off the road with something as unoriginal as import taxes is in for a crashing reality check,” the firm concludes.