As Beijing and Washington stare down in another trade war, Western academics and policy elites have debated the effects of the Trump administration’s massive tariff hike on China. Some assert that the tariffs – which have spiked up to 145 percent after successive rounds of tit-for-tat retaliation – are a boon for Beijing; others contend they will devastate China’s economy and spark a major political crisis for Xi Jinping.
In Chinese policy circles, debate is significantly less contentious. While experts acknowledge that increased tariffs will place downward pressure on export-led growth, many emphasize that Beijing is less reliant on exports and more diversified in terms of trade partners than in 2018. Moreover, several view reciprocal tariffs as self-defeating, predicting that they will create strategic opportunities for Beijing to promulgate structural reforms that will boost long-term growth and expand China’s commercial influence abroad.
Widespread recognition exists among Chinese policy elites that Beijing has a stronger bargaining position today than it did during the first Trump administration. Prominent economist Li Daokui, the director of the Center for China in the World Economy at Tsinghua University, stated that “in 2008, exports made up more than 30 percent of our GDP, and this figure has now decreased to 17 percent.” Li noted that regarding China’s “exports to the U.S, as a ratio of GDP, has decreased from 6 percent during the first Trump administration to 3-4 percent today.”
Wei Jianguo, a former vice minister of commerce, declared adamantly that “we are prepared” and noted that the share of China’s exports that went directly to the U.S. “decreased from 19.2 percent in 2018 to 14.7 percent in 2024.” Simultaneously, he pointed out, the “proportion of exports going to countries along the Belt and Road Initiative (BRI) increased from 38.7 percent to 47.8 percent and to ASEAN countries from 12.8 percent to 16.4 percent.” Wei asserted that “our trading partners are more diverse,” noting that Beijing had learned to “never put our eggs in the same basket.”
Several Chinese policy elites argue that tariff-induced instability will compel Beijing to take meaningful steps to bolster consumption. Zhao Yanjing, a professor at Xiamen University, put it bluntly: “Trump’s tariff shock is actually a good thing… it is rapid decoupling from the U.S. consumer market that has forced China to embark upon a path of transformation – unwillingly at first, but ultimately the right one for long-term growth.”
Lu Feng, director of the Macroeconomic Research Center at Peking University, asserted that “it is urgent to use both hands: that is, to externally deal with the tariff situation and vigorously promote rebalancing at home.” He emphasized that Beijing can “turn this crisis into opportunity” not only to counter the United States but also to “address the long-term contradiction between insufficient domestic demand and weak consumption with the help of the external environment.”
Wang Chanlin, the recently appointed deputy head of the National Development and Reform Commission and former vice president of the Chinese Academy of Social Sciences (CASS), concurred that as others “use their own market advantages to threaten to impose tariffs on other countries, we must attach great importance to expanding domestic demand” to “effectively resolve the impact of external shocks.”
Zhang Bin, the deputy director of the Institute of World Economy and Politics at the CASS, asserted that “China has abundant policy space to expand domestic demand and hedge against the decline in external demand…without needing to worry about inflation risks.”
Chinese elites broadly agree that Beijing has the ability to step in and prop up demand. Tian Xuan, dean of the National Institute of Finance at Tsinghua University, stated that China has a “relatively perfect macro-control system and a rich policy toolbox” to deal with tariffs. Tian emphasized “taking this opportunity to lower interest rates” such as for targeted medium-term lending facility (TMLF) among other actions, like increasing the utilization of reverse repo operations to boost liquidity.
Li Daokui added that Beijing is “fully capable” of doling out direct consumption subsidies by “increasing the national debt by 10 trillion yuan or even higher” and could liberalize purchase restrictions on real estate and increase pension payments. Once imposed, Li argued, these policy changes will have a “positive impact on China’s economy that will far exceed the impact of tariffs.”
Similarly, Chen Jianqi, a professor at the International Institute of Strategic Studies at the Central Party School, noted a “rich toolbox” to meet Washington’s “tariff blackmail” and called for accelerating debt issuance, increasing financial tax rebates, and “lowering reserve ratio requirements from 6 percent.”
Others note how Washington’s tariffs could help China meet broader strategic goals abroad. Yao Yang, dean of the National School of Development at Peking University, described Trump’s tariffs as a “historic mistake” contending that “as the U.S. now limits our direct exports to America, many Chinese companies are acquiring factories abroad. This is prompting Chinese companies to accelerate their overseas expansion, and in turn, this is a golden opportunity for China to reshape global manufacturing.”
Wu Xiaoqiu, dean of Renmin University’s National Academy of Financial Research, argued that Washington’s tariffs will “destroy relations between the EU and the U.S.” and that consequently “there is new opportunity for the relationship between China and Europe.”
Others note that U.S. tariffs could help China realize one of its long-held objectives: decreasing reliance on the U.S. dollar. Guan Tao, chief economist of Bank of China’s International Securities, noted the irony in that “to ensure global dollar liquidity, the U.S. must maintain a trade deficit. However, as Washington tries to reduce the deficit through tariffs, global liquidity will tighten and weaken the international status of the dollar.”
Washington’s tariffs have unequivocally damaged the U.S. economy. The Trump administration’s first trade war caused the loss of 245,000 U.S. jobs, led to a 0.16 percent decrease in real wages, and dragged U.S. GDP growth down to record lows. Chinese elites recognized their counter-productive nature. Li Zhi, assistant dean of Tsinghua University’s Institute of Regional Development, wrote that while trade conflict during Trump’s first term resulted in “some losses in the early stage for China” it ultimately enabled “economic breakthroughs” for Beijing by accelerating dual circulation.
A similar scenario is unfolding again. Washington’s latest “reciprocal tariffs” are projected to decrease U.S. GDP by 0.2 percent and 10-year revenue by $132 billion. They will not only weaken the U.S. economy but also present advantageous openings for Beijing to bolster consumption and expand its global commercial presence through improved ties with Europe and others. Chinese experts are confident that Beijing can weather the storm and even emerge from it stronger. Washington must reverse course to bring Beijing back to the negotiating table, lest it face the consequences of a self-inflicted setback of the highest order.