In this game of tariff chicken, China has little to lose

How comparatively quaint the opening weeks of 2025 seem now. It was a time before the world’s two biggest economies had their tariff guns trained on each other, spraying retaliatory duties on their imports, melting down markets and taking the world to the brink of a global recession.

Long gone are the heady days of January, when Donald Trump and Chinese President Xi Jinping spoke on the phone, before the US president-elect had officially returned to the White House, with lofty rhetoric about solving the world’s problems together.

Talk of a meeting between the pair to strike a deal on trade has also evaporated.

Donald Trump’s ultimatum demands Xi Jinping’s surrender, an unfathomable option for the Chinese president.Credit: AP

We are faced with an all-out trade war, with Trump and Xi locked in a spiral of tariff brinkmanship.

The clock is ticking towards the US president’s latest deadline – April 9 – when he’s threatened to hit Chinese imports with an extra 50 per cent tariff unless Beijing withdraws the 34 per cent return-serve duty on American goods it lobbed last week.

That would take total tariffs on the country beyond 100 per cent – a crippling outcome for Chinese exporters, who send $US400 billion ($660 billion) in goods to America each year, which would further hamper an already struggling economy.

Trump’s ultimatum demands Xi’s surrender – an unfathomable option for the Chinese president, who has signalled he is prepared to weather the economic pain rather than fold.

To the world, Beijing has declared it will “fight to the end” and “resolutely take countermeasures”.

It is simultaneously preparing the Chinese people to strap in for tough times while assuring them the “the sky will not fall”.

“China is a super economy. We are strong and resilient in the face of the US tariff bullying,” said a recent commentary in the People’s Daily, the Chinese Communist Party’s official newspaper.

Seasoned China watchers don’t expect Xi to buckle.

“The US and China are locked in a game of chicken like two race cars driving directly toward each other. Whoever swerves first will stand to lose prestige and profit,” political scientist Wen Ti-Sung said in an online analysis.

Arthur Kroeber, a China expert at consultancy firm Gavekal Research, said Trump, through his ratcheting tariffs, had in effect committed to ending US trade with China.

“What comes next from Beijing is almost certainly further retaliation, both in the form of additional tariffs and, most likely, the extension of export controls and the targeting of more US companies for investigations of various kinds. At this point, China has little to lose,” Kroeber said in a research note.

America, once the bastion of free-market evangelism, under Trump has embraced the cudgels of economic coercion that the West has, until now, been more inclined to associate with Beijing – as Australia, and its lobster industry, knows all too well.

Where this ends is difficult to predict. From a geopolitical perspective, Trump’s worldwide trade assault on almost every country – regardless of past alliances, and whether populated by people or penguins – has delivered a gift to Beijing.

It has been marketing itself as a beacon of stability and a partner of choice in a world of Trump-driven chaos.

“The window is closed for China and the United States to have any meaningful material conversation or negotiation,” said Chucheng Feng, from Hutong Research, an independent consultancy in Beijing. “China will be taking this opportunity to solidify its partnerships, especially trade partnerships, with the rest of the world.”

Even for close allies such as Australia, whose economy is heavily tied to China’s, calls to reassess the marriage with the US – views once dismissed by hawks as fringe – have, in light of questions about America’s reliability, entered the mainstream.

So much for the art of the deal.

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