China Claims Victory in Trump's Trade War

The Sino-American Trade Conflict: A Shift in Power Dynamics

The recent trade discussions between the United States and China, held in Geneva and London, have offered only temporary relief in the ongoing economic rivalry between the world's two largest economies. While U.S. President Donald Trump has framed the partial agreements as a win for America, China interprets the situation differently, viewing itself as emerging stronger and more self-reliant from the conflict.

Since the trade war began in 2018, China has developed a multifaceted strategy that combines defensive and offensive tactics to reduce its vulnerabilities. On the defensive side, it has restructured trade routes, created alternatives to the dollar-based financial system, and accelerated investment in indigenous technologies. Additionally, it has focused on boosting domestic consumption not as an end goal, but as a way to strengthen key sectors such as artificial intelligence and green technology.

On the offensive front, China has tightened export controls and shown a willingness to respond swiftly and decisively to U.S. actions. Its reactions to the Trump administration’s tariff threats reflect a strategic flexibility and determination. In recent months, China has taken a firm stance in negotiations, refusing to be intimidated. It is not just reacting to pressure; it is reshaping the terms of the trade conflict according to its own vision.

Meanwhile, the Trump administration has inadvertently revealed the extent to which U.S. industries depend on China for critical resources such as rare-earth minerals. The disruption caused by Trump's tariffs has left U.S. manufacturers struggling and paying higher prices for materials. In early April, the Chinese government implemented rare-earth export controls, gaining a powerful tool to impact American businesses.

Trump's unpredictable tariff policies have provided the Chinese Communist Party (CPC) with a propaganda advantage, even if standing up to Trump is not as popular in China as some outsiders assume. More importantly, it has given China a strategic edge. For many governments in the Global South, China's resilience under U.S. pressure supports President Xi Jinping's assertion that the world is experiencing "great changes not seen in a century."

From the Chinese perspective, the Trump administration’s push to decouple the two economies represents a broader effort to hinder China's rise. While China does not seek a trade war or full decoupling, it is willing to risk a conflict that the U.S. may lose, preferring to decouple rather than submit to Trump’s demands.

This mindset has led Chinese leaders, businesspeople, and entrepreneurs to focus on building resilience and self-reliance. This means reducing dependence on U.S. markets and technology. Although U.S. consumer demand and technological innovation remain unmatched, Chinese firms now see their chances of competing in the U.S. market as minimal. Huawei’s remarkable recovery after U.S. sanctions is a prime example. Similarly, ByteDance is facing similar pressures as Trump attempts to force it to sell TikTok to American buyers.

While Trump's tariffs do cause pain, especially in low-value manufacturing sectors like apparel and footwear, the impact could lead to long-term benefits for China. Shrinkage in exports might accelerate industrial consolidation, eliminate less efficient players, and improve overall efficiency. Although unemployment could rise, the high level of automation in Chinese factories suggests that political fallout would be limited. Moreover, China has faced worse challenges before, such as the restructuring of the 1990s and 2000s, which led to the layoff of over 76 million workers. New waves of layoffs are unlikely to threaten the CPC’s control.

The long-term effects of Trump’s tariff policies are even more significant. Just as the Huawei crackdown spurred China’s tech ambitions, renewed geoeconomic restrictions have made it easier for CPC leaders to rally public support against perceived foreign aggression. The brief pause in tariffs, which offers exporters a short-term window to clear inventory rather than establishing a lasting peace, has not changed this dynamic.

Given that Trump’s tariff policies coincide with the final year of China’s 14th Five-Year Plan, policymakers have attempted to boost domestic consumption and support small businesses through fiscal and monetary stimulus. However, these measures will not address the economy’s deeper structural issues, particularly the low rate of household consumption. Achieving a balanced economy will take years.

In the meantime, as external conditions worsen, the CPC leadership, composed largely of engineers, and the country’s industrialists will continue to invest heavily in advanced technologies, especially AI-driven manufacturing ecosystems, to avoid a productivity crisis. China’s high-stakes bet on developing domestic technology, first initiated during the 2018 trade war, is not a guaranteed success. But as the U.S. tries to corner China, few believe there is another viable path forward.