When the first two rounds of 10% tariffs hit, Zou Guoqing, a Chinese exporter, groaned but didn’t find the barriers insurmountable. He gave up some of his profits and offered his client, a snow-bike factory in Nebraska, price cuts ranging from 5% to 10%. It seemed to work: The factory agreed to a new order of molds and parts.
But when President Donald Trump announced an additional 34% universal tariff on Chinese goods on April 2, Zou, who’s been exporting to the U.S. for more than a decade, was incredulous.
“There’s not a thread of feasibility,” said Zou, who does business in the eastern Chinese city of Ningbo. “It looks like I would have no choice but give up trading with the U.S.”
Then came 50% more from Trump, followed by another hike — pushing the universal tariff on Chinese goods to the sky-high 145%, and Zou said he now could only hope that the two leaders can communicate. “We are pausing the shipments,” he said, “until the leaders talk.”
The 145% tariff from the United States and the retaliatory 125% tariff from China are putting businesses doing trade between the U.S. and China on edge. They’re fretting not only about their next orders, but also the viability of their business if there’s no quick relief. Experts are worried the decades-long trade ties that have underpinned the relationship between the world’s two largest economies could be unraveling.
Trade ties are tested
If the high tariff is sustained for the next six months or longer, “that would actually lead to a real effective decoupling between the American and Chinese economies,” said Chen Zhiwu, professor of finance at Hong Kong University Business School.
Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, said the sky-high tariff, if kept in place, amounts to “almost a trade embargo,” making it impossible for China to export low-value items such as apparel to the U.S. It also would force U.S. businesses to source elsewhere, away from China, if there should be alternatives, he said.
In a turn, the Trump administration late Friday said it would exclude electronics like smartphones and laptops from reciprocal tariffs, which means they won’t be subject to the 145% tariffs levied on China. The exemption seemed to reflect Trump’s realization that his China tariffs are unlikely to shift more manufacturing of smartphones, computers and other gadgets to the U.S. any time soon.
In China, the central tariff office flat-out declared there was “no possibility for market acceptance” of U.S. goods exported to China” at the current tariff level.
“Everyone’s pretty worried,” said Hu Jianlong, founder of Brands Factory, a consultancy that works with Chinese companies trying to break into overseas markets. “At this point in time, there’s no good way forward. This situation has not resolved … there’s no final number. And so everyone’s still waiting to see how this will develop.”
The high-stakes tariff war has come more than 20 years after China — with the help of the United States — joined the World Trade Organization and began to see its economy soar on luring foreign investments and exporting to the U.S. and other Western markets. By last year, China-U.S. trade was $582 billion, but tensions have flared over China’s widening trade imbalance with the U.S. That led to the first tariff skirmish during the first Trump term.
The trade deficit has since narrowed but stayed stubbornly high, at a time when the U.S. and other Western markets have also grown concerned about another onslaught of Chinese products such as electric vehicles.
Decouple or ‘de-risk’?
During his four-year term, former President Joe Biden stressed that the U.S. was not trying to decouple from China but to “de-risk.” He took the “small-yard, high-fence” approach, under which his administration put up barriers in targeted sectors such as advanced chips, artificial intelligence and quantum computing that have national security implications.
Now, Trump is declaring universal tariffs on all Chinese goods but has said he’s also willing to talk with Beijing. It remains unclear what his goals might be.
“What are they looking for in those negotiations? How much is it possible to reduce these tariffs? What are the other demands apart from China removing its retaliatory tariffs that the United States wants to put forward. We don’t know what that would be,” said Greta Peisch, who served as the general counsel for the Office of the U.S. Trade Representative in 2021-2024.
The message from China’s leadership is loud and clear. It will talk only when the U.S. stops “maximum pressure and capricious and destructive behavior,” said Lin Jian, a Chinese Foreign Ministry spokesperson.
Li Cheng, professor of political science at the University of Hong Kong, said the Chinese leadership is upset over being singled out by Trump when the U.S. president paused “reciprocal” tariffs for 90 days for all other countries. Beijing wants to make sure that “Donald Trump not state one thing in the morning and say other things in the evening,” Li said, and that Trump’s policies on China are not hijacked by his anti-China, hawkish advisers.
