After months as a trade pariah, China is now at the heart of US President Donald Trump's efforts to reset relations and avoid another tariff spiral. Back in April, Trump labeled China "the greatest threat to America," saying it had "cheated" the world's largest economy for decades. He then slapped massive tariffs of 145% on Chinese goods.
Just months later, the tone has shifted. Trump has extended the tariff pause on China, praised President Xi Jinping as "a strong leader," and floated the idea of a US-China summit this fall. Meanwhile, countries like India and Brazil now face the steepest penalties — up to 50% tariffs — while China's rate is capped at a more manageable 30%.
Trump has several reasons for giving China an easier ride. He wants to avoid a tariff spike just as US retailers stock up on Chinese imports for the crucial holiday season. Trump is also buying time to allow negotiations on a broader trade deal that could include technology, energy and rare earth minerals.
As China is the only country to firmly confront Washington's aggressive policy stance, Antonio Fatas, economics professor at INSEAD Business School, thinks Beijing's strategy may have left Trump scrambling for leverage.
"From the beginning, it was clear that China was more willing than the US to have a full-blown trade war," Fatas told DW, which would bring "economic consequences that the Trump administration cannot afford."
China's secret weapon: rare earths
China's dominance in rare earths — needed to produce everything from electric vehicles to missile guidance systems — is arguably Beijing's strongest card. With US industries heavily reliant on Chinese supply, these minerals have become a decisive factor in the trade standoff.
After Trump announced sky-high tariffs in April, China, which controls about 60% of global rare earth production and nearly 90% of refining, imposed export controls on seven rare earth elements and permanent magnets, hitting US industries hard, including carmakers.
Washington is also pushing for tighter restrictions on China's access to advanced artificial intelligence (AI) chips, while pressuring Beijing to cut imports of Russian oil, warning of secondary sanctions — including steep tariffs — if volumes continue to rise.
Further down the list of priorities, Trump is urging China to quadruple its purchases of US soybeans — a boost to American farmers and last year's $295.5 billion (€254.5 billion) trade deficit between the world powers. China is by far the world's largest soybean importer, accounting for more than 60% of global demand, mostly for livestock feed and cooking oil.
China, on the other hand, is seeking a lasting rollback in US tariffs, especially around technology and manufacturing. Beijing also wants safeguards for Chinese firms from US sanctions and assurances over access to cutting-edge US chips.
At the same time, the Chinese government is now actively discouraging the use of Nvidia's H20 processor, the most advanced US chip currently allowed for export to China. Analysts say this move is a public show that the country is becoming less reliant on the US for high-end technology.
Trump shifts spotlight to domestic issues, Ukraine
Economist Alicia Garcia-Herrero, a senior fellow at the Brussels-based think tank Bruegel, noted Trump's many trade, domestic and geopolitical challenges — like Friday's peace talks with Russian President Vladimir Putin in Alaska — as other reasons he's giving China more leeway.
"Trump has enough on his plate... and has no choice but to offer China more [time] than other countries," she told DW.
Now that the tariff truce has been extended until early November, negotiators can zero in on the most contentious issues. Chief among them is avoiding a return to triple-digit tariffs — 145% on Chinese goods and 125% on US exports. Both sides agree such a move would be economically damaging.
China's current 30% average tariff rate remains significantly above most other countries. Chinese copper and steel exports to the US are subject to a 50% levy.
Trump flips script on India
While China enjoys extra time, India's fall from favored partner at the start of Trump's second term to trade villain has been swift. The country now faces a punishing tariff of up to 50% — 25% on general goods and an additional 25% on Russian oil purchases that's expected to kick in on August 27.
INSEAD's Fatas noted that "India has neither the economic size of China, exports crucial for US industry, nor the power to inflict damage on the US economy," calling on New Delhi to work with allies to show collective strength and secure a better tariff.
While China may appear to have the upper hand in negotiations, Han Shen Lin, China Managing Director of strategic advisory firm The Asia Group, warned against complacency from the Chinese side. After all, Trump's flair for chaos leaves room for unexpected moves.
"We can't underestimate the US's ability to add more shock value [to negotiations]," Han told Reuters news agency. "I suspect the type of leverage the US has, as the largest consumer market in the world, will be a factor that will cause other countries to think cautiously."
Escalation avoided, economic pressure stepped up
Despite softening his tone, Trump is keeping up the pressure on China in other ways. Chinese exporters have been rerouting goods meant for the US through Southeast Asian countries, especially Vietnam, Malaysia, and Thailand. The objective is to obscure their origin and avoid direct US tariffs.
In response, Trump has imposed a sweeping 40% transshipment tariff on all nations suspected of facilitating Chinese rerouting, which took effect last week.
With US-China negotiations expected to stretch until the deadline, Garcia-Herrero, who is also chief economist for Asia-Pacific at French investment bank Natixis, foresees a partial trade thaw that benefits US firms while sidelining key allies.
"We'll likely get movement on both export controls on high-end chips from the US side and rare-earths from Beijing," Garcia-Herrero told DW. " China will likely see a slightly lower [base] tariff and US companies will get better access to the Chinese market, to the detriment of the European Union, South Korea and Japan."
