US President Donald Trump recently intensified the offensive trade against China by imposing a second round of tariffs within two months, challenging their position as a manufacturing country. He has raised import levies on Chinese goods to a minimum of 20%.
The latest measure is part of Trump’s broader strategy to pressure Beijing. Beijing is already subject to heavy US tariffs, including a 100% levy on Chinese-manufactured electric vehicles and a 15% duty on clothing or footwear.
These tariffs directly impact China’s manufacturing network, including fashion, toys, solar panels, and electric vehicles. Since the 1970s, the country’s manufacturing sector has contributed to its economic success by leveraging low labor costs and state investment.
China’s trade surplus reached a record $1 trillion in 2024, driven by $3.5 trillion in exports that exceeded its $2.5 trillion in imports. These new tariffs could threaten China’s continued dominance of an export-dependent economy.
Understanding Tariffs and Their Economic Impact
Tariffs are a tax on imported goods, typically calculated as a percentage of their value. The importer is responsible for paying these costs, which can make importing foreign products more expensive.
Tariffs can encourage consumers to choose domestically made products, making imports more costly. This boosts local industries and supports domestic labor. Trump has proposed that these tariffs can stimulate the US economy, protect American jobs, and generate additional tax revenue.
However, economic analyses of similar tariffs implemented during his first term show that the burden ultimately falls on US consumers as increased product costs are passed down to buyers.
The Trump administration has also justified the tariffs as a means of pressuring China to address the illicit flow of fentanyl into the United States. Similar measures have been imposed on Mexico and Canada, with Trump arguing that their governments have not done enough to curb cross-border drug trafficking.
Could These Tariffs Hurt China’s Manufacturing Sector?
Economic analysts agree that the new tariffs could significantly impact China’s manufacturing sector. Harry Murphy Cruise, an economist at Moody’s Analytics, noted that exports have stabilized China’s economy. He warns that if the tariffs persist, Chinese exports into the US could decline by as much as 25-33%.
Since exports comprise about one-fifth of China’s total economic output, a 20% tariff could lead to a decline in international demand and a narrowing trade surplus. Alicia Garcia-Herrero, the chief economist for the Asia-Pacific Region at Natixis in Hong Kong, has emphasized the need for China to strengthen its domestic consumption.
Although China has recently introduced stimulus measures to spark domestic spending, overcoming these challenges will not be easy. Analysts also note that China’s manufacturing dominance cannot be displaced overnight.
China’s Response: Countering Tariffs
China has retaliated against Trump’s tariffs by imposing 10-15% tariffs on key US exports, including agricultural goods, coal, liquefied natural gas, and luxury cars.
Additionally, Beijing has targeted American firms with regulatory restrictions in the aviation, defense, and technology sectors and has launched an anti-monopoly investigation into Google.
Since China continues to be a manufacturing powerhouse with government support, extensive supply chain networks, and competitive labor costs, it may be an uphill battle for the US to dethrone the country.
Trump’s new tariffs may potentially disrupt America’s global standing, opening opportunities for Beijing to position itself as a proponent of free trade. However, China’s trade policies, including its past imposition of a 200% tariff on Australian wine imports, may complicate its standing as a stable economic partner.
The US continues growing ties in Europe, Southeast Asia, and Latin America. Despite political tensions and trade restrictions, economic interdependence between the world’s two largest economies is unlikely to disappear anytime soon.
