Has China begun to blink in Trump tariff face-off?

US President Donald Trump's 90-day pause on reciprocal tariffs for all countries but China is proving to be a sharp move. Trump's tariffs had pitted the US against the rest of the world but now it appears to be primarily a US versus China battle. China might have sensed the new reality. Its commerce ministry said on Thursday that China is open to dialogue with the US. "We hope the US will meet China halfway, and, based on the principles of mutual respect, peaceful coexistence and win-win cooperation, properly resolve differences through dialogue and consultation," Commerce Ministry spokesperson He Yongqian said as reported by AFP.

The latest statement indicates China could be moderating its hard stance against the US. Earlier, after China imposed tit-for-tat tariffs on the US, the ministry had a stern message for the US: "The US threat to escalate tariffs on China is a mistake on top of a mistake and once again exposes the blackmailing nature of the US. China will never accept this. If the US insists on its own way, China will fight to the end." This time, China has refrained from a tit-for-tat move after Trump escalated tariffs to a total 125%.


China could be beginning to blink due to several reasons that make its position vulnerable in the tariff war.

China's economy is not fighting-fit
For China, the trade war comes at a time when its economy is buckling under a protracted property crisis and high levels of local government debt, souring confidence among both businesses and consumers.

Beijing, feeling boxed into a corner by the US' intensifying tariff assault on China and any country that buys or assembles Chinese goods, is bracing for an economic war of attrition, Reuters has reported. "Whoever surrenders first becomes the victim," a Chinese policy adviser told Reuters. "It’s a matter of who can hold out longer." China has no great options, though. It will court other markets in Asia, Europe and the rest of the world, but this may not be much of an escape valve. Other countries have much smaller markets than the U.S., and local economies are also taking a hit from the tariffs. Many are also wary of allowing more cheap Chinese products in.

Domestically, a currency devaluation would be the simplest way to cushion the tariffs' impact but that could trigger capital outflows, while also alienating trade partners China may try to court. China has so far allowed very limited yuan depreciation. More subsidies, export tax rebates or other forms of stimulus could be on the cards, but this also risks exacerbating industrial overcapacity and fuelling more deflationary pressures.

Analysts have advocated for years for policies that would boost domestic demand. But despite Beijing's declarations, little has been done to meaningfully increase household consumption, given that the bold policy shifts that would be required could prove disruptive to the manufacturing sector in the short term.

Hitting back with its own tariffs and export controls may not be very effective, given China ships to the U.S. about three times as much in goods than around $160 billion it imports. But it may be the only option if Beijing believes it has a higher pain threshold than Washington has.

"China cannot inflict as much pain on the US as it receives, since it runs the big trade surplus and, rare earths aside, still has more to lose from export controls," Arthur Kroeber, head of research at Gavekal, had told Reuters after China's tit-for-tat tariff move against the US.

Pressure has been building on Chinese officials for consumer-focused stimulus measures to cut the economy's reliance on exports and investment for growth, and Beijing has long promised such steps to make growth more sustainable. But it has not yet announced any meaningful steps, aside from a consumer subsidy programme, which economists expect to have limited impact.

China's consumer prices fell for the second straight month in March while factory-gate deflation worsened, as an escalating US trade war heightened worries about mounting piles of unsold exports that could drive domestic prices even lower, Reuters reported. The world's second-largest economy has gotten off to a bumpy start this year. A nascent pick-up in retail sales and robust expansion in factory activity have been offset by rising unemployment and deflationary pressures, fuelling calls for more stimulus.

Consumption has been in focus this year with the net export contribution to growth projected to turn negative as Beijing imposes countermeasures against U.S. tariffs, putting China's GDP growth target of around 5% in some doubt.

Citi cut China's GDP growth forecast to 4.2% from 4.7% for 2025, citing rising external risks.
Citi said in a note that high tariffs could drag China's growth further by at least 1.5 percentage points on an annualised basis, with an extra impact of about 0.6 percentage points in 2025.

Premier Li Qiang has said that Beijing is "fully capable of hedging against adverse external influences", adding that China's policies this year fully take account of uncertainties. "(We should) respond to the uncertainties of the external environment with strong and effective policies," Li said

China suddenly stands isolated
Trump's 90-day tariff pause on all countries except China has isolated China. It is reaching out to other nations in what appears to be an attempt by Beijing to form a united front to compel Washington to retreat. Days into the effort, it's meeting only partial success from countries unwilling to ally with the main target of Trump's trade war.

Australia on Thursday declined Beijing's proposal to work together to counter US tariffs, saying instead it would continue to diversify its trade and lower its reliance on China, its largest trading partner. "We are not going to be holding hands with China in respect of any contest that is going on in the world," Deputy Prime Minister Richard Marles told Sky News, referring to the Chinese ambassador's proposal for countries to "join hands" on trade. "We are not doing that. What we are doing is pursuing Australia's national interests and diversifying our trade around the world," he said.

China has also called upon India to stand together against the "US abuse of tariffs" and overcome difficulties. "China-India economic and trade relationship is based on complementarity and mutual benefit. Facing the US abuse of tariffs, which deprives countries, especially Global South countries, of their right to development, the two largest developing countries should stand together to overcome the difficulties," Yu Jing, spokesperson of Chinese Embassy in India, posted on X a few days ago.

However, India has already made it amply clear that it would not forge a common front with China against the US tariffs. India is rather taking steps to discourage China to dump cheap goods into India now that its exports to the US face steep tariffs.

In a pointed critique of global trade imbalances, Union Commerce Minister Piyush Goyal said recently that China’s economic ascent was built on "unfair trade practices", hidden subsidies, and distorted labour models—ignored by much of the world since Beijing joined the WTO in 2001. “This growth was fuelled by unfair trade practices. This growth happened at the cost of fair play,” Goyal said. “Its foundation lay in actions which, by the rules of the game, would be considered improper.” Chinese news outlet Global Times reported that Chinese experts have slammed the rhetoric of Goyal for called the US' reciprocal tariffs an "opportunity of a lifetime" and blaming China for the current turmoil in the global economy.

China also reached out to the EU with a phone call between Premier Li Qiang and European Commission President Ursula von der Leyen. That was followed by a video conference between Chinese Commerce Minister Wang Wentao and EU Commissioner for Trade and Economic Security ?efcovic on Tuesday to discuss the US "reciprocal tariffs". However, the EU has paused its retaliatory tariffs against the US after Trump's 90-day pause and is likely to pursue a trade deal with the US.

China now stands alone in its battle against Trump tariffs. Trump has already offered to negotiate a trade deal with China. It's possible China will now accept the offer as the situation has turned adverse for it after Trump's 90-day pause for other countries.

(With inputs from agencies)