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President Donald Trump is set to increase the minimum tariff on Chinese goods to 104 percent at midnight on Wednesday, but Beijing is betting it can stare him down with a simple strategy: retaliate, then sit back and wait.
While about 70 countries targeted in Trump's "Liberation Day" tariff blitz last week are angling for a deal, the administration says, Beijing has done the opposite: Instead of rushing into high-level talks, it has promised to continue retaliating by any means available while trying to cushion its economy.
"The U.S. threat to escalate tariffs on China is a mistake on top of a mistake," China's Commerce Ministry said in a statement Tuesday. "China will never accept it. If the U.S. insists on its own way, China will fight to the end."
The world's two largest economies are locked in a rapidly escalating trade war that could cause a global recession and push their rivalry to a new level of confrontation. China believes it has the upper hand.
"Some people here believe that we should not seek negotiations right away," said Wu Xinbo, dean of the Institute of International Studies at Fudan University in Shanghai, who was part of a delegation that met with U.S. academics and officials in New York and Washington in February.
Chinese officials have long said that a trade war will only hurt the American economy. The last week of market turmoil and cracks in support for Trump's tariffs have further cemented the view that Beijing need only wait a little longer for backlash to build, according to Wu.
"By then Trump will be under a ton of pressure and is maybe willing to negotiate with China, and by then China will be in a better position to bargain," he said. "If we offer to negotiate right now, that plays into Trump's hands."
Trump on Monday threatened to impose an additional 50 percent tariff on China if Beijing did not withdraw the 34 percent retaliatory duties it announced Friday, matching the figure the president issued last week. That came on top of the 20 percent Trump had already levied, meaning the minimum tariff on Chinese goods could soon be 104 percent.
White House press secretary Karoline Leavitt confirmed Tuesday that the tariffs would rise to 104 percent at midnight on Wednesday.
"It was a mistake for China to retaliate. When America is punched, [the president] punches back harder," Leavitt said at a briefing Tuesday. "That's why there will be 104 percent tariffs going into effect on China tonight at midnight."
Although China is projecting confidence, it faces significant constraints in its response: For one, its economy was not in great shape even before Trump unleashed his tariffs. And second, China exports far more to the United States than it imports, meaning Beijing cannot match Trump's tariffs dollar for dollar.
"China's leaders recognize they are asymmetrically vulnerable to an escalating trade war," said Ryan Hass, an expert on Chinese politics at the Brookings Institution, a Washington think tank. "But they do not believe they have an exit ramp [and] will not tolerate being publicly pressured into submitting to Trump's will."
China, under strongman leader Xi Jinping, has a lot to lose from a spiraling trade war. The Chinese economy has just started to turn the corner from a prolonged property market slump, weak spending and high youth unemployment.
Chinese businesses and employment would inevitably take a hit.
As such, Beijing's end goal is still to negotiate with Trump, analysts said. "They are trying to use retaliation to push the U.S. to negotiate," said Henry Gao, a trade expert at Singapore Management University.
"These measures are mostly for political show to tell everyone that China is not afraid of the U.S.," he said.
In the meantime, China has been steadily expanding its kit of retaliatory tools to make up for the fact that it runs a large trade surplus with the United States.
These include sanctions on U.S. companies operating in China and restricting U.S. access to key materials needed to make high-tech products, including medical equipment and nuclear reactors. Beijing could further restrict other kinds of rare earths or critical minerals of which China dominates production.
"China left itself some room," said Sun Chenghao, a fellow at the Center for International Security and Strategy at Tsinghua University in Beijing. "If we want to ratchet up controls, then we can."
Officials are considering further retaliatory measures, according to well-connected nationalist bloggers. These include banning the importation of American movies, investigating more U.S. companies operating in China or suspending cooperation on curbing the flow of fentanyl into the United States.
"We have not closed the door to negotiations, but we will not take chances, either. Instead, we have made all kinds of preparations to deal with any impact," said an article on Niu Tanqin, an influential blog run by a former journalist with the state news agency, Xinhua.
Even analysts who predicted Beijing would be more aggressive than other countries have been surprised by the scope and force of China's retaliation against Trump.
"China seems to be saying: ‘You're crazy. You can't just do this to us,'" said Leah Fahy, a China economist at Capital Economics, a consultancy. "It signals the leadership is relatively confident that the Chinese economy can deal with the tariffs, at least in the near term."
Beijing has said that it is ready to unleash further measures to stimulate its economy if the tariff war threatens the government's ambitious growth target of "around 5 percent" for the year. Some analysts are predicting the trade war could cut that rate in half.
The People's Daily, the mouthpiece of the Chinese Communist Party, said Sunday that authorities' attempts to "vigorously boost" consumer spending could be dialed up to "extraordinary" levels.
Banks could spur more lending by cutting interest rates, and the government could issue special treasury bonds, the paper said.
"They're essentially saying they're willing to spend loads more this year, which can help prop up growth," Fahy said.
Economists are debating when exactly China will step in with significant support. Some argue it will wait until later in the year, while others say it could intervene as early as this month.
Officials are already taking steps to shore up confidence in Chinese stocks, which have been buffeted in the past week. Hong Kong's Hang Seng Index, where many Chinese exporters are listed, fell 13 percent on Monday, its steepest one-day decline since the Asian financial crisis of 1997.
But after the "national team" of major state-owned investment firms - with lending support from China's central bank - started buying shares Tuesday, markets on the Chinese mainland and in Hong Kong rebounded.
Beijing has also allowed its currency to weaken slightly, to the lowest rate since September 2023. Trump has often accused China of gaining an unfair trade advantage through currency manipulation that lowers costs for Chinese businesses.
A major devaluation, although unlikely, is among the most destabilizing moves for international markets that China could make to protect its economy. Beijing appears to be sending a message to Trump that this is still a possibility, analysts said.
But for now, Beijing is preparing for the long haul.
"Chinese leaders know the ultimate goal [for Trump] is decoupling, so the game is to steel themselves for that ultimate outcome," said Yanmei Xie, an independent expert on Chinese politics. "If the U.S. is not even in a dealmaking mindset, then caving doesn't bring you anything. The only choice is to adapt."
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