Chinese Responses to U.S.-China Trade War

Executive Summary

• In response to U.S. tariffs on Chinese goods, Beijing announced on April 11 that it will raise its tariffs on American goods to 125%.
• China has also responded with non-tariff measures, including export controls and investigations into the Chinese operations of American companies, notably DuPont.
• Beijing’s tough responses are meant to assuage Chinese public anger against the United States. They are also intended to demonstrate to the world that China will stand up to the United States and is prepared for a protracted conflict between the two great powers.
• Aside from immediate retaliatory measures, the Chinese government continues to prepare for a decoupling of the U.S. and Chinese economies by adopting measures to increase domestic consumption, reduce exports, and expand in non-U.S. markets.
• The current trade war is already impacting Chinese manufacturers. It will also likely impact American businesses. Chinese tariffs and non-tariff measures will have negative effects on the supply chains of American companies and their market shares in China. U.S. tariffs are also likely to have significant impact on American tech companies that have extensive manufacturing operations in China. In addition, U.S. secondary tariffs, if implemented, could make it difficult for American companies to relocate their China-based manufacturing operations to countries like Vietnam, which may also be subject to U.S. tariffs.

China’s Non-Tariff Responses

On April 11, the Chinese government announced that it will raise tariffs on American goods to 125% from its previous rate of 84%, in response to U.S. tariffs on Chinese goods. However, China has also responded with non-tariff measures.

For example, Beijing announced on April 4 that it would impose export controls on the following rare earth minerals, which have applications across various critical industries:

• Samarium, which is used in lasers and nuclear reactors.
• Gadolinium, which is used in MRI contrast agents.
• Terbium, which is found in computer monitors, television screens, and sonar systems.
• Dysprosium, which is found in magnets for electric vehicles, wind turbines, and nuclear control rods and lasers.
• Lutetium, which has petrochemical and medical applications, especially in cancer treatment.
• Scandium, which is found in alkaline batteries and is used to strengthen aluminum alloys, especially for aerospace applications.
• Yttrium, which is used in superconductors and medical applications.

These seven minerals are also heavily used by the U.S. defense industry. According to the U.S. Geological Survey, 70 percent of U.S. rare earth minerals were imported from China in 2022 and 2023. Although the United States produces some rare earth minerals, most of them are processed in China. China currently processes 90% of the global rare earth minerals.

In addition to rare earth minerals, China’s Ministry of Commerce placed 16 American companies on its export control list and 11 more on its Unreliable Entity List (UEL) (see Pamir blog on the UEL) on April 4. On April 9, China added 12 more U.S. companies to its export control list and six more to the UEL. The newly listed American companies are all defense firms, and they include drone-related companies like BRINC Drones, SYNEXXUS, Kratos Unmanned Aerial Systems, and Rapid Flight.

Other retaliatory measures adopted by Beijing included an anti-trust investigation into DuPont’s China operations and an anti-dumping investigation against American X-Ray tube assemblies and tubes for CT scanners. The United States, along with India, is a major exporter of these medical devices. In addition, China Customs suspended certifications for six American companies to export chicken, meat, and protein products to China.

China is reportedly working to block the sale of 43 ports in 23 countries by the Hong Kong-based CK Hutchison (CK) to a group of U.S. investors led by BlackRock. The ports in question include two on each end of the Panama Canal. The Chinese government launched its investigation into the CK sale on grounds of “fair competition.” China accounted for 12% of CK’s global revenue in 2024.

China also suspended the approval of new Chinese investments in the United States. According to the Chinese government, China’s 2023 overseas investments were up 8.7% year on year ($177.29 billion). However, Chinese investments in the U.S. for the same period declined 5.2% year on year ($6.9 billion). As of 2023, China’s total non-financial investments in the U.S. accounted for 2.8% ($83.69 billion) of China’s total overseas investments.

On April 7, Liu Hong, a veteran journalist who has been a deputy chief editor of the state-controlled media company Xinhuanet since December 2024, posted a blog on his Weixin (WeChat) account (under the name Niu Tan Qin). According to Liu, unnamed Chinese official sources revealed to him that the Chinese government was prepared to take the following actions if the United States were to carry out the additional 50% tariff that President Trump threatened to do:

1. Significantly increase tariffs on American agricultural imports, notably soy and sorghum.
2. Ban imports of American chicken.
3. Suspend cooperation with the United States with respect to fentanyl. 
4. Adopt countermeasures against American services. According to the U.S. Department of Commerce’s Bureau of Economic Analysis, the United States has enjoyed a surplus in its trade in services with China since 1999. In 2024, the U.S. surplus with respect to trade in services with China was $31.8 billion, an increase of just over $5 billion year on year.
5. Ban imports of American movies. On April 10, the China Film Administration announced that China would “moderately reduce the quantity of American film imports” in response to the U.S. government’s “erroneous method of indiscriminate imposition of tariffs against China.” China has consistently been the second largest film market in the world.
6. Investigate “the state of American enterprises acquiring intellectual property benefits in China.”

According to Chinese sources, Beijing’s tough responses are intended to assuage the Chinese people’s anger toward the United States and to demonstrate China’s resolve to engage in a protracted conflict with the United States.

China Prepares for Protracted Conflict

Chinese experts are pessimistic about the long-term consequences of the current trade war with the United States even if the two governments can achieve short-term compromises. Over the past eight years, China has been preparing for a deterioration in bilateral economic relations. Chinese analysts believe that China’s preparations will lessen some of the impact of U.S. trade policy now and in the future. China’s preparations have included the following:

• Increasing domestic demand. China’s December 2024 Central Economic Work Conference designated increasing domestic demand as the top economic priority for China in 2025. Currently, China’s household consumption expenditure rate is approximately 40%. The global average is 56% and the average among developed countries is 70%.

• Reducing China’s dependence on exports. In 2023, China’s exports accounted for 18.8% of its GDP in 2023 (down from the peak of 36% in 2006). According to an April 6, 2025, People’s Daily article, 85% of Chinese export-oriented companies have begun efforts to target China’s domestic market. In 2024, domestic sales accounted for 75% of these companies’ revenue.

• Expanding to non-U.S. markets. After an earlier trade war with the United States broke out in 2017, China worked to expand its markets in other parts of the world, and it has achieved positive results, according to the Chinese government and media. An April 7, 2025, commentary by the People’s Daily reported that Chinese exports to ASEAN countries increased from 12.8% of its total exports in 2018 to 16.4% in 2024. At the same time, China’s exports to Belt & Road (BRI) countries increased from 38.7% to 47.8% of China’s total exports. Meanwhile, Chinese exports to the U.S. have dropped from 19.2% of its total exports in 2018 to 14.7% in 2024, which was the lowest since 2001. However, some Chinese exports have made their way into the United States through third countries such as Mexico and ASEAN countries. Japan’s Nomura Securities estimated that, in 2023, $24 billion of Mexican exports to the U.S. and $82 billion of ASEAN exports to the U.S. were diverted Chinese exports.

• Finding new sources of imports. Agricultural and energy products are the main products that China imports from the United States. U.S. agricultural exports to China declined 20% in 2023 and then 14% in 2024. American soybean’s market share in China declined from 40% in 2016 to 21% in 2024. Even so, China was still the destination for half of U.S. soybean exports worldwide. Similarly, U.S. corn exports to China declined from $2.6 billion in 2023 to $561 million in 2024. As China reduces its agricultural ties with the United States, it has turned to countries like Brazil, Argentina, and Australia. With respect to energy, in June 2019 China imposed a 25% tariff on U.S. LNG imports and switched its sourcing to the Middle East, Russia, and Australia. In 2024, China imported 76.65 million tons of LNG, but only 5.4% came from the United States. On March 18, 2025, Bloomberg reported that China halted American LNG imports for 40 days. In 2024, China imported 553 million tons of oil, but only 1.74% came from the United States.

• Forming new partnerships against the United States. Presently, China has concluded 22 free-trade agreements (FTA) with 29 countries and regions, accounting for one-third of China’s foreign trade. In his March 5 government work report, Premier Li Qiang said China will work to upgrade its existing FTAs and is actively seeking to join the Digital Economy Partnership Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. On March 30, top Chinese, Japanese, and South Korean economic officials met in Seoul and agreed to expedite negotiations for an FTA among the three countries. Chinese experts also mentioned that China will work with other countries to file complaints with the WTO against the United States.

Business Impact

The ongoing trade war between the United States and China is impacting Chinese businesses. It is widely reported that Chinese manufacturers are shutting down operations and laying off employees due to canceled foreign orders.

American businesses are unlikely to go unscathed. In terms of percentages of China’s total export to the United States, Chinese-manufactured smartphones (mostly iPhones) and computers and tablets, particularly iPads, have been the top two categories of goods at 9% and 7%, respectively. American companies in these sectors that rely on Chinese manufacturing will be significantly impacted by the U.S. tariffs.

Washington is also considering secondary tariffs against Chinese components and raw materials used for manufacturing in other countries. If implemented, these tariffs will make it more costly for American companies to relocate manufacturing operations from China. In addition, countries like Vietnam and India, which have been destinations for relocated U.S. manufacturing operations, will be significantly impacted by U.S. secondary tariffs.

China is expected to do more to reduce its reliance on the United States in many technology sectors by setting up more restrictions on American products and seeking alternative supplies for products and materials it once bought from the U.S. Moreover, Beijing is expected to intensify its support for Chinese brands. All these efforts by Beijing to minimize the long-term impact of the intensifying U.S.-China trade war will have deleterious effects on American companies.