China believes capitulating to Trump on tariffs serves no purpose and isn't an option
The fact the world's two biggest economies have essentially ceased trading with one another is truly remarkable and will have brutal impacts both domestically and beyond.
Thursday 10 April 2025 03:55, UK
Another day, another escalation.
China awoke to the news tariffs on its exports to America are now at a whopping 125%, and the ball is now back in its court. Will it retaliate further?
China responding has, up until now, been expected. Leaders here have clearly decided to take a stand and they're likely to keep seeing that through.
But there are big questions about what escalation now looks like, how far could things spiral and what, if any, are the off-ramps?
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There is a degree to which further rises in tariffs become largely symbolic; anything above 50% makes almost all trade impossible anyway, the difference between 100%, 150%, even 1,000%, is negligible.
There is a sense the Chinese may yet be exercising a degree of restraint, retaliations have thus far matched what Donald Trump has done like-for-like, and more political options that would seriously raise the stakes have been avoided.
Indeed measures such as totally ceasing cooperation on fentanyl (the street drug ravaging the US which is often made using chemicals from China) are a "nuclear" option that has been floated in state media here.
But China could also go after high-profile US companies like Apple or Tesla, or target American agricultural products more directly.
Perhaps China really does want to avoid escalation, or perhaps it wants to leave some options open for later.
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One thing is certain: any potential deal will have to be palatable to the Chinese. This is a system that doesn't like losing face and it has clearly calculated its economy is big enough to absorb these headwinds.
Indeed, there is a genuine belief at the top levels of the Chinese system that the US's ultimate goal is to restrain China and undermine its growth; in that context capitulating to Mr Trump serves no purpose and just isn't an option.
Whichever way you cut it, this moment marks a real low point in US-China relations. The fact the world's two biggest economies have essentially ceased trading with one another is truly remarkable and will have brutal impacts both domestically and beyond.
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There are fears too about how perilous this makes the politics. Throughout the years, despite all the strife and disagreements between the two, trade was always there as a backstop, the one issue which inextricably linked them.
Without that, it's unclear what could come next.