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Published 10:12 IST, February 5th 2025

Xi’s Careful Reply To Trump Tariffs Shows China Has More To Lose

China's President Xi Jinping adopts a measured stance in response to US tariffs.

Reported by: Business Desk
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Donald Trump Invites China's Xi Jinping to Attend His Inauguration
Xi’s careful reply to Trump tariffs shows China has more to lose | Image: X

In the latest escalation of the US-China trade war, President Xi Jinping's response to President Donald Trump 's tariffs underscores a cautious strategic approach by Beijing. Xi's calculated retaliation, which includes targeted tariffs and regulatory maneuvers, reflects China's efforts to mitigate economic risks while maintaining leverage in negotiations.


Learning from Past Trade Wars
During Trump's first term, China responded to US tariffs with proportional measures, escalating tensions and impacting global markets. This time, however, Beijing refrains from mirroring Trump's aggressive tactics. Larry Hu, head of China economics at Macquarie Group Ltd., highlights China's recognition that "a full-blown tariff war is not in China's interest," advocating instead for domestic economic stimulus.


Selective Tariffs and Economic Maneuvering
Xi's administration imposed tariffs on $14 billion worth of American products, a fraction of Trump's targets, while enhancing export controls and launching an antitrust investigation into Google . These measures not only signal China's capacity to retaliate but also its strategic restraint to avoid market volatility.


Economic Pressures and Strategic Diversification
China faces economic challenges exacerbated by deflationary pressures and a property market slowdown. Despite these hurdles, Xi has successfully diversified imports away from the US, bolstering China's resilience in trade negotiations.

Market Reactions and Diplomatic Moves
The Hang Seng China Enterprises Index rebounded post-tariffs, reflecting market relief amidst the measured responses from both sides. Trump's alternating rhetoric on China, from tough demands to potential agreements, complicates the path forward as global economic uncertainties loom.

Prospects for US-China Negotiations
Trump's recent statements indicate a willingness to negotiate with Xi, though the timeline remains uncertain. The Phase One trade deal and TikTok ownership discussions add layers to the negotiations, where both leaders seek to balance economic interests with geopolitical pressures.

Future Pathways and Diplomatic Challenges
Moving forward, the shape of any agreement hinges on China's willingness to make concessions, possibly including increased purchases of American goods and compliance with existing trade agreements. Analysts suggest that repairing US-China relations will require a delicate balance of economic diplomacy and geopolitical maneuvering.


As US-China trade tensions continue to evolve, President Xi Jinping's cautious response underscores China's strategic priorities amidst economic challenges and global uncertainties. The coming negotiations between Xi and Trump will be pivotal in shaping international trade dynamics, impacting global markets and geopolitical relationships.

(With Inputs From Bloomberg) 
 

Updated 11:36 IST, February 5th 2025