There’s No Need to Fear China’s Economy
Key takeaways
- The United States appears to be on the ropes in trade negotiations with China.
- However, unlike most of President Donald Trump’s hapless trade war victims, Beijing punched back hard.
- In return, the administration may have to give on dismantling some export controls on advanced technology or even diluting U.S. support to Taiwan.
The United States appears to be on the ropes in trade negotiations with China. After taking office, the Trump administration threw down the gauntlet with Beijing, briefly imposing 145 percent tariffs in April 2025 and more than doubling its effective tariff rate on China to around 40 percent for much of the past year. Washington’s theory was that depriving China of the U.S. consumer would force Beijing to concede on market access and bringing down the bilateral trade deficit. At one point, Treasury Secretary Scott Bessent crowed that China was “playing with a pair of twos” given its dependence on exports to the United States, which clocked in around $500 billion in 2024.
However, unlike most of President Donald Trump’s hapless trade war victims, Beijing punched back hard. It raised equivalent tariff barriers and leveraged China’s overwhelming dominance in the production of rare-earth minerals to choke off supply of these critical industrial inputs, threatening U.S. production of everything from autos to aircraft and weaponry. The United States then, in effect, cried uncle, backing down from its most severe tariff threats. This week, Washington limped into trade discussions with Beijing on May 14 seeking an extended reprieve on China’s rare-earth export controls and headline pledges to buy more U.S. agricultural goods and energy.
The United States appears to be on the ropes in trade negotiations with China. After taking office, the Trump administration threw down the gauntlet with Beijing, briefly imposing 145 percent tariffs in April 2025 and more than doubling its effective tariff rate on China to around 40 percent for much of the past year. Washington’s theory was that depriving China of the U.S. consumer would force Beijing to concede on market access and bringing down the bilateral trade deficit. At one point, Treasury Secretary Scott Bessent crowed that China was “playing with a pair of twos” given its dependence on exports to the United States, which clocked in around $500 billion in 2024.