This week, US tariffs are poised to rise as President Donald Trump’s administration moves forward with plans to implement an additional 10% duty on imports from China. This escalation has elicited swift responses from Beijing, with China gearing up countermeasures aimed at American agricultural exports amid escalating trade tensions between the two nations.
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China’s Strategy to Counter US Tariffs, Enhance Factories & Foster Growth
China Focuses on US Agriculture as Main Target for Retaliation
The potential counter-responses from China to the US tariffs are under intense scrutiny by global markets right now. A report from Global Times, a state-owned publication, indicates that US agricultural and food items are likely to become significant targets for Beijing’s retaliation.
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“China is currently developing and analyzing countermeasures in light of the U.S. threat to impose an added 10% tariff on Chinese goods, supposedly in connection with fentanyl,” the Global Times revealed, quoting an unnamed source.
“These countermeasures will likely encompass both tariff and non-tariff actions, with a focused listing of US agricultural and food products.”
Historically, agricultural exports have been a focal point during previous trade disputes, making this anticipated approach unsurprising. Despite a 14% reduction in Chinese imports of US agricultural goods in 2024, American farmers remain susceptible to additional disruptions.
“Even with a decrease in imports since 2018, any tariffs on vital U.S. agricultural items like soybeans, meat, and grains could significantly affect U.S.-China trade as well as impact U.S. exporters and farmers,” stated Genevieve Donnellon-May, a researcher with the Oxford Global Society.
Surge in Factory Orders Preceding Tariff Implementation
In February, China’s manufacturing sector displayed surprising resilience as importers hurried to place orders before the tariffs went into effect. The official purchasing managers’ index climbed to 50.2%, up from 49% in January, surpassing the critical level separating contraction from expansion.
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There was particularly robust growth in new orders, with that index soaring to 51.1. Companies are hastily preparing for the impending tariff increases, resulting in this uptick.
“Continued industrial production indicates that government expenditure and anticipatory actions to avoid the higher tariffs bolstered stronger business activity last month,” noted Zichun Huang of Capital Economics in a recent analysis.
However, the analyst warned that:
“growth still looks at risk of slowing this quarter, at least partially reversing the positive trend seen in Q4 (October-December). And this is before the impact from tariffs is truly felt.”
Economic Stimulus Initiatives Announced Amid Intensifying Trade War
As trade tensions between the US and China escalate, President Xi Jinping’s administration is preparing to unveil major economic stimulus measures during the upcoming National People’s Congress starting Wednesday. Analysts generally anticipate that Chinese authorities will stick to their growth goal of approximately 5% for 2025.
To meet this target amid increasing external challenges, Beijing is poised to raise China’s official budget deficit target to its highest level in over 30 years. The government is likely to roll out trillions of yuan in stimulus spending to counteract deflation, the collapse of the property market, and the effects of rekindled trade conflicts with the US.
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“The approach to handle tariffs is akin to addressing other challenges within the Chinese economy, which involves stimulating domestic consumption,” remarked David Li Daokui, an economics professor at Tsinghua University and a frequent advisor to the government.
Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University, provided a candid evaluation: “A China-U.S. trade war isn’t unavoidable, but Trump’s decision to impose tariffs now is misguided. Trump and his advisors may believe these tariffs serve to pressure China, sending a message, but this will likely backfire, provoking a strong counter-response from China.”
The full extent of China’s economic stimulus and counteractions will become clearer this week with the implementation of the new US tariffs and the convening of the National People’s Congress, paving the way for a likely sustained period of China-US trade tensions.
