The U.S.-China trade war is escalating. But China may have more leverage than the U.S. thought

Peter Armstrong · CBC News

· Posted: Apr 17, 2025 4:00 AM EDT | Last Updated: 10 minutes ago

As the commercialized warfare betwixt the U.S. and China escalates, the biggest questions are which broadside has much leverage and which is consenting to tolerate much pain.

China exported much than $400 cardinal US to the United States past year, overmuch much than American companies sold to China. That's wherefore the Trump medication claims it has each the leverage.

"The shot is successful China's court. China needs to marque a woody with us. We don't person to marque a woody with them," said White House property caput Karoline Leavitt connected Tuesday.

"China wants what we have; each state wants what we have: the American consumer. Or to enactment it different way, they request our money," she told reporters successful Washington.

But the commercialized scenery is much analyzable than that. And experts accidental China believes it tin some inflict much harm connected the U.S. and tolerate much symptom from a tariff war.

"China does person a batch of cards to play. It has a batch of leverage," said Jia Wang, a elder chap astatine the China Institute astatine the University of Alberta.

WATCH | More connected China's retaliation: 

A alteration successful China's response

Modern U.S.-China commercialized is dominated by tech products and electronics, everything from iPhones to computers to batteries.

But Wang says determination are tremendous exports of important concern inputs that volition beryllium precise hard for the U.S. to regenerate due to the fact that China controls overmuch of the world's production. For example, successful a retaliatory measure, it banned exports of definite captious minerals earlier this month.

The prohibition covers 7 uncommon world elements and magnets utilized successful defence, vigor and automotive technologies.

"That's truly going to wounded U.S. industries, and precise fewer countries tin truly capable that gap," she said. "There's conscionable not capable clip for different suppliers to rapidly travel to the marketplace and to proviso the magnitude needed by the U.S … so it's a precise almighty paper China tin play."

Wang besides pointed to the information that China is America's second-largest overseas creditor, holding astir $760 cardinal US successful Treasury securities arsenic of January.

Unlike the commercialized warfare successful 2018 erstwhile China rapidly sought to negociate a interruption successful tariffs, this time, Beijing is taking a much assertive approach.

"If the U.S. truly wants to resoluteness the contented done dialog and negotiation, it should halt exerting utmost pressure, halt threatening and blackmailing, and speech to China connected the ground of equality, respect and communal benefit," Foreign Ministry spokesperson Lin Jian said astatine a briefing.

Meanwhile, Chinese President Xi Jinping is touring Southeast Asian countries to ramp up economical ties and transportation China arsenic a much reliable spouse than the U.S.

U.S. exports are conscionable 1 part

Spencer Hakimian, main concern serviceman of Tolou Capital Management successful New York, says China has already spent years diversifying its commercialized partners.

"China's exports to the U.S. are level implicit the past 13 years," helium says. But implicit that aforesaid period, helium says, its exports to the remainder of the satellite went up much than 80 per cent.

Even during the archetypal Trump presidency, helium says China was much exposed to American tariffs. Today, helium says China's exports to the U.S. are $400 cardinal US connected a gross home merchandise of $20 trillion US total.

"This is 2 per cent of their economy," helium said. "Yes, truthful it hurts, but erstwhile you person an system increasing astatine 5 per cent and you person a one-time nonaccomplishment of 2 per cent, it's not arsenic important arsenic you truly deliberation it is."

He says China had a semipermanent strategy and a wide program for what it was going to bash erstwhile American tariffs were imposed. 

Compare that, helium says, to the chaotic attack retired of Washington, whose tariff complaint connected China keeps changing. When markets plunged past week, Trump unilaterally scaled things backmost with sweeping exemptions. His apical furniture picks person offered wildly antithetic rationale for the tariffs, sometimes adjacent contradicting each other. Some person said the tariffs are imperishable and meant to rise revenue, portion others person said they are a constituent of leverage to nonstop commercialized concessions.

"I'm an American, I enactment my country, I privation the Americans to triumph this commercialized war," said Hakimian, "but I person to beryllium objective, too, due to the fact that I'm a planetary plus manager and that's my job. Obviously, the Chinese are much prepared for this."

A higher symptom tolerance

Two noted China experts published a probe insubstantial successful The Washington Quarterly past week outlining Beijing's emerging strategy.

Evan Medeiros and Andrew Polk wrote astir what they called China's "precision-guided economical munitions" that spell beyond the captious mineral controls. That includes considering antitrust investigations of overseas businesses, they say. In the aftermath of the past U.S. commercialized war, China introduced a proviso called the Unreliable Entity List, which could marque it much hard for targeted firms to bash concern successful the country.

WATCH | Fact-checking Trump's claims connected China: 

Above all, China has a higher symptom tolerance successful a commercialized war.

Wang says the Chinese Communist Party doesn't person to interest arsenic overmuch astir aggravated consumers upset astir the economical interaction of a commercialized warfare arsenic the American medication does.

"Given each the chaos successful the U.S., it's inactive an electoral system. So President Trump and his cabinet, they're inactive having to ticker however the polls are going to respond to the situation," she said.

Put each that together, and the Chinese attack to the commercialized warfare begins to instrumentality shape. The Chinese enactment believes it tin inflict existent pain, adjacent portion it uses the situation to fortify ties to neighbouring countries.

The hard portion astir immoderate struggle is uncovering a mode out. The U.S. seems to person thought it could unit China to the array and nonstop concessions connected its terms. Just weeks into this commercialized war, that is proving much analyzable than galore thought.