Analysis

China’s response to the Trump Administration’s announced tariffs includes a direct and proportional imposition of duties on American goods. On April 4, 2025, China announced a 34% tariff on US goods, effective April 10, before escalating over the week. In response to potential further US tariffs, Beijing vowed to “fight to the end.” American and Chinese businesses will need to adapt quickly to bear the cost of these escalations. Beyond broad tariffs, China is making use of other instruments in its economic toolkit. China suspended US sorghum, poultry, and bone meal imports, and placed further export controls on rare earth minerals. Beijing also initiated an anti-dumping investigation against US and Indian medical CT tube imports. US businesses should recognize that China is expanding the playing field and creating unpredictable risks for specific sectors and supply chains. The big takeaway from the Trump Administration’s back-and-forth on tariffs is this: outcompeting China is the main goal for the Administration, and tariffs with China are likely to stay even as tariffs on other countries are removed or reduced.

US tariffs against China are likely to trigger escalation, rather than negotiation. From the Trump Administration’s perspective, tariffs are a way to fulfil a key campaign promise and to demonstrate a “tough on China” stance. Xi Jinping, however, is incentivized to respond forcefully rather than capitulate to the US. Xi’s status at the helm of a CCP bent on “national rejuvenation” means that stoking Chinese nationalism is fundamental to both the CCP’s legitimacy and Xi’s political survival. Neither Trump nor Xi is therefore encouraged to back down, although some concessions may trickle through.  

Trump’s moves are also pushing China to directly intervene in its domestic markets. The People’s Bank of China supported Central Huijin Investment Ltd.—a subsidiary of China Investment Corp and substantial arm of the country’s sovereign wealth fund—to increase stock index fund holdings, promising further support to stabilize markets. China’s State-owned Assets Supervision and Administration Commission backed state-owned enterprises’ share purchases and buy-backs to boost market confidence.

Despite official confidence, Chinese companies are seeking to mitigate tariff impacts. The Ministry of Commerce discouraged firms like Shein from diversifying sourcing. In response, Shein cancelled planned supplier tours to Southeast Asia. This intervention highlights the Chinese government’s concern about a potential manufacturing exodus in response to the tariffs. We should continue to see strains between Beijing’s official line and the efforts of domestic Chinese companies to protect their own interests. This friction between corporate self-interest and state directives reveals a critical internal pressure point in China’s response strategy that foreign businesses should pay close attention to.

Analysis

As the global race for tech dominance accelerates, a bipartisan push led by Senators Marsha Blackburn (R-TN) and Mark Warner (D-VA) aims to reassert US leadership in shaping international technology standards. The Promoting United States Leadership in Standards Act responds to China’s growing influence in standards-setting bodies—often guided by authoritarian values—by strengthening American engagement and advancing democratic norms.

The bill directs the National Institute of Standards and Technology (NIST) to assess and report on US participation in international standards organizations, offering strategic insights to guide policy and industry. It also mandates a public online portal to increase transparency and stakeholder input, and provides $10 million in grants to support US-based international meetings on AI and emerging tech.

For US businesses, the bill promises clearer, values-driven regulatory environments that support innovation, protect intellectual property and data privacy, and give American companies a competitive edge. By encouraging participation from a wide range of stakeholders, including small and mid-sized enterprises, the legislation promotes a more responsive and encompassing standards process.

The bipartisan support also signals a unified US commitment to technological governance, potentially boosting market confidence and international alliances. By taking the initiative to shape global technology standards, the act seeks to secure America's innovative edge in the digital age.

Analysis

China’s massive overcapacity in the production of manufactured goods holds back emerging economies in lower tech sectors and threatens advanced economies in strategic and high tech sectors. This overcapacity has contributed to deflation domestically and a flood of cheap imports internationally. The causes are political, and not economic. In the case of some manufactured products, like construction materials, poor local and national planning led to gross overbuilding of housing and infrastructure, and their component materials. In the case of more strategic and higher technology products, including batteries, robotics, new materials, commodity refining, solar energy, and EVs, overcapacity is the direct result of CCP General Secretary Xi Jinping’s deliberate policy to dominate global markets in those sectors.

While downward pressure on prices in these sectors threatens the profitability and survival of businesses in both China and abroad, the government of China props up its own failing enterprises with various types of subsidies, including below-market rate loans, gifts of land, artificially depressed wages, and various import barriers to foreign competition. Foreign competitors are left facing a deluge of subsidized Chinese goods, followed by losses in profitability. Then these enterprises disappear altogether, thus eroding the industrial base in their home countries.

This is not a problem that the United States and other advanced economies can negotiate away. First, China simply lacks the domestic demand to absorb its surplus productive capacity, even if it decided to take that path. In addition, all indications, including a devaluation of the yuan, show that China is committed to overcapacity and exports. Most importantly, overcapacity is an integral element in Xi Jinping’s zero-sum, neo-mercantilist world view of economics as war by other means. Other weapons in China’s arsenal include intellectual property theft, widespread hacking, and harassment of employees of foreign companies in China. The eventual failure of foreign competitors in key sectors is not a consequence of Xi’s economic policies; it is the goal.

Foreign businesses that depend on the Chinese market need to keep this in mind. Given China’s ingrained, ideological neo-mercantilism, any benefits from the Chinese domestic labor and consumer markets are likely to be temporary.

Analysis

The escalating tariff conflict between the United States and China is profoundly disrupting global supply chains, with the technology sector facing particularly acute challenges. Following the US administration's imposition of a 104% tariff on all Chinese goods, which was subsequently raised to 125% on April 9, China retaliated by increasing its tariffs on goods from the United States to 84%. These tit-for-tat measures have disrupted the deeply interconnected global technology production system to an unprecedented degree.

For decades, China has served as the primary manufacturing hub for US technology companies. American tech giants have become reliant on China's extensive manufacturing infrastructure, skilled labor force, and well-established component supply networks. In recent years, growing geopolitical risks stemming from China's increasing authoritarianism and unrelenting loss of US intellectual property have prompted corporate diversification of manufacturing bases to alternative locations such as India and Vietnam. The sharp increase in supply costs imposed by these tariffs now renders such diversification strategies not merely prudent, but essential for long-term viability–even though the short-term costs of diversification can be high.

Several prominent companies are already re-evaluating their dependence on Chinese manufacturing. Luxshare, a key supplier for Apple, is reportedly considering a significant shift of its production capacity out of China to mitigate the impact of the tariffs. Similarly, Nvidia recently announced plans to invest hundreds of billions of dollars over the next four years to bolster its supply chain within the United States. However, the relocation of manufacturing capabilities away from China presents considerable challenges, given the intricate nature of global supply chains and the substantial costs associated with establishing new infrastructure and replicating existing efficiencies elsewhere.

The consequences for China's economy are severe. Technology manufacturing is a major employer, supporting millions of jobs and serving as a critical engine of economic growth. The anticipated reduction in orders from US technology companies is already causing significant economic strain, particularly in major manufacturing centers such as Shenzhen and Shanghai. Some economic analysts predict that China's official economic growth rate could decelerate to 4.5% in 2025, falling below the government's official target of 5%.

The escalating trade dispute also significantly increases the potential for a "decoupling" of technology supply chains along geopolitical fault lines. Such fragmentation would inevitably lead to increased costs, reduced efficiency due to the duplication of technological capabilities, and a potential slowdown in the pace of innovation across the global technology sector. In response to these challenges, China would likely intensify its already existing and formidable campaign to acquire foreign technology and expertise by any means necessary.

Analysis

Recent hiring freezes and firings across the US intelligence community (IC) will place a greater burden on the US private sector, as well as state and local governments, to defend themselves against espionage from the People’s Republic of China (PRC). While the Trump Administration reduces employees, expertise, and entire programs from the IC, Chinese spying continues unabated. The FBI, CIA, NSA, DIA, and the Cybersecurity and Infrastructure Security Agency (CISA) have all lost funding and employees.

The private sector has had to take part in its own defense against Chinese economic espionage for decades. Nevertheless, US government agencies, especially FBI, and CISA, and the NSA’s industry-facing Cybersecurity Collaboration Center, played major roles in uncovering, prosecuting, and publicizing China’s activities. These organizations frequently shared with the private sector information and analyses about new and emerging cyber campaigns. This assistance better equipped US companies to protect their customers–and ultimately, the US economy–from Chinese government sponsored predation. The loss of so much expertise and talent certainly weakens US counterintelligence and thus benefits China’s economic espionage efforts, particularly its drive to acquire US advanced technology. 

A silver lining for business, however, is that many more experienced counterintelligence, cybersecurity, and China experts are available to share their knowledge of the China threat and appropriate countermeasures. Businesses that have not yet integrated counterintelligence into their operations would profit–often literally–from availing themselves of this expertise.