China Waited to Strike Back, Now is the Time

On April 2nd, Trump confidently unveiled an unprecedented extreme tariff plan, attempting to extort all countries worldwide.

Perhaps Trump believed that, as the US Treasury Secretary Bessent put it, countries would rush to compromise with the US government early on, after which Trump would ease some pressure and see how much more he could squeeze out. It cannot be denied that many countries did indeed plan to do just that.

However, what happened next caught Trump off guard. The US stock market plunged for two consecutive days, with indices dropping by about 10%, resulting in a market capitalization loss of $6.4 trillion. On April 4th, the Chinese government announced substantial retaliatory measures, with 11 arrows firing back, imposing a 34% tariff on all US goods, causing another sharp drop in the US stock market on the same day.

In my view, this is precisely the retaliatory opportunity that China has been waiting for, and the time has come.

Trump played all his cards on tariffs. This is not only his weakest moment but also the best opportunity for a counterattack.

Since 2018, China has been preparing earnestly to contend with the US. Throughout this process, the US has been making moves, and China has essentially figured out the tactics. Trump’s “Liberation Day” action on April 2, 2025, has laid all his cards on the table. In my opinion, he is not prepared for serious follow-up actions and is just following the same old routine, waiting for other countries to compromise. At this moment, when Trump is at his weakest, China’s strong retaliatory measures are absolutely beyond his expectations and are a checkmate that the US finds difficult to deal with.

The fundamental reason for America’s weakness

The fundamental reason for America’s weakness lies in the decline of its manufacturing sector. The belief that “imposing tariffs can promote the development of American manufacturing” is merely a hollow idea for those who do not understand the actual operations of businesses. Balaji Srinivasan, a prominent Indian-American Silicon Valley investor, serial entrepreneur, technology expert, and futurist, whose thoughts and viewpoints wield significant influence in the tech industry, commented that a symptom of America’s deindustrialization is that many commentators have never truly managed a physical enterprise.

Most American cars heavily rely on foreign sources for their parts.

An American company imports parts worth $1 million, produces products selling for $1.2 million, and makes a gross profit of $200,000. Faced with a 30% import tariff, it will not shift to local production of components because “it’s like being asked for the equivalent of planting a maple tree when all you need is a little maple syrup” and “establishing a screw factory is much more expensive than paying high tariffs for foreign screws.”

In this scenario, the company will respond in two ways: the first is to opt for lower-priced components at $750,000, still selling the product for $1.2 million, hoping customers will accept it; the second is to pay the $300,000 tariff, sell the product for $1.5 million, hoping to make sales, and in the meantime, borrow money to pay the tariff.

During the McKinley era, the United States had the most efficient workforce and industrial development system globally, making the argument for developing manufacturing through high tariffs plausible. Nowadays, the efficiency of American workers is extremely low, and imposing tariffs cannot solve this problem. Trump mistakenly believed he could emulate McKinley’s success, which is a misguided approach.

China’s Confidence in Counterattack

China’s counterattack is built upon the foundation of having the world’s most powerful manufacturing capabilities, giving them the confidence to confront tariffs head-on, with businesses not compromising and the yuan not devaluing.

After multiple rounds of US tariff impacts, domestic Chinese businesses have formed a consistent expectation: to raise prices in response to US tariffs. US buyers demand that Chinese sellers bear additional tariffs, but Chinese businesses adjust their prices accordingly. If the US imposes a 54% tariff and the US buyer wants the Chinese seller to share half, the seller will raise prices by 27%, or they could choose to bear the full amount and increase prices by 54%. Even if orders are canceled, there is no way around it; losing money on deals is not an option.

The reality is that China’s manufacturing industry has no global rivals; they are essentially competing against themselves. American buyers are free to look elsewhere, but if they could find suppliers abroad, they would have done so already.

For instance, many American and foreign companies manufacture in China and export to the US, so their operations are impacted by tariffs, with Apple being one of the most affected. These companies also consider relocating their production lines. After years of practice, the situation has become clear: the transition is not as straightforward. Even if they are determined to move, they would still need cooperation from the Chinese supply chain.

On the currency front, China has gained experience in dealing with the United States as well. In 2018, when Trump imposed tariffs on China, the Chinese yuan devalued, effectively lowering prices of all goods for the US market, thus alleviating some of the pressure on buyers and sellers to negotiate tariffs. Following Trump’s recent tariff hikes, the Chinese yuan did not experience significant devaluation; instead, it saw a 1000 basis point increase, indicating a clear goal of stabilizing the exchange rate. Some suggesting a 20%-40% devaluation of the yuan to counter US threats are simply speaking nonsense. The yuan will not devalue just because the US threatens substantial tariff increases; it is already significantly undervalued and will transmit price pressures outward.

The Impact of China’s Tariffs on US Goods

Let’s discuss the impact of China imposing a 34% tariff on all US goods. In 2024, US exports to China totaled $143.5 billion. Chinese tariffs on all American goods will also pose a significant challenge for US companies. The US stock market is under pressure as the AI bubble has deflated, teetering on the edge of a bear market. The stock market’s impact on the economies of China and the US differs significantly. Both the US economy and Trump cannot afford a stock market crash or prolonged downturn.

Recently, the price of gold has surged past $3000, dealing a significant blow to the long-term credibility of the US dollar. Global central banks have started to make assessments on the dollar and are increasingly adding to their gold reserves. The pressure on US bonds is also substantial, with interest expenses totaling $480 billion in the first five months of the 2025 fiscal year (starting from October 2024). Over the next 10 months, the US government will need to sell over $1 trillion in bonds each month to meet obligations such as repaying principal, paying interest, and addressing the fiscal deficit. Following the sharp drop on April 4th, the Nasdaq index has fallen by 23% from its peak, entering a bear market. These conditions are placing significant strain on the US economy.

At this critical juncture, Trump is engaging in tariff extortion against all countries worldwide. The strongest player, China, has already retaliated firmly, while other powerful and experienced opponents are also taking action; countries like Canada and the EU will not be as easy to deal with as smaller nations.

Economists are not optimistic about Trump’s tariff actions, and this assessment does not require a high level of expertise. The deep-rooted issues in the US manufacturing sector cannot be solved simply by imposing tariffs; it requires meticulous industrial planning, patient strategic execution, in essence, learning from China.

Trump’s original intention was not to initiate an uncontrollable global trade war; he does not have such a contingency plan. The current US administration has displayed a noticeable lack of discipline and has made several errors. Trump’s strategy is to apply maximum pressure, force opponents to compromise, and negotiate on his terms, expecting to gain advantages through his so-called “art of the deal.”

China is prepared while Trump is not; our side is patiently waiting for the right moment, while the opponent is launching aggressive attacks from all directions. China’s tariff counterattack has already dealt a blow to the US stock market, targeting Trump’s vulnerabilities at the most opportune moment will undoubtedly yield encouraging results.

Editor: Leo Cai