China’s Potential $1.9 Trillion Tariff Wave Could Impact Global Economy

China is getting ready for an extended economic battle with Donald Trump following his imposition of additional tariffs on Beijing, while also declaring a temporary halt for other trade partners.

Over the years, the Communist country has developed a strategy that shifted from constructing housing to building factories worth $1.9 trillion for manufacturing low-cost products for export. This resulted in a 13 percent and 17 percent increase in exports in 2023 and 2024, respectively.

Currently, Chinese businesses, which had initially responded to Trump’s tariffs by giving discounts to long-standing American customers, are now prepared to abandon the U.S. market completely in search of new buyers.

Joe Biden’s trade representative Katherine Tai sounded the alarm of factories closing in America and worldwide to The New York Times: ‘The tsunami is coming for everyone.’ 

China has started taking action against American companies, adding half a dozen to a trading blacklist, including Shield AI and Sierra Nevada. 

Another 12 American companies – including American Photonics and BRINC Drones – now face export controls, according to The Wall Street Journal. 

Trump announced a 125 percent tariff on China Wednesday morning, after the country had slapped a ‘revenge tariff’ of 84 percent on the United States in response to the ‘Liberation Day’ duty.  

The president also announced a 90-day pause on all new ‘reciprocal’ tariffs on Wednesday, in a major reversal which caused one of the biggest stock market rallies in history, singling out China for its ‘lack of respect… to the World’s Markets.’

China is preparing for a ‘prolonged economic warfare’ with Donald Trump (pictured) after the president added additional tariffs on Beijing, while announcing a pause for other trading partners

The Communist nation – under President Xi Jinping (pictured) has spent years fostering a strategy that transitioned from building housing to $1.9trillion constructing factories to make cheap goods for export, seeing them rise 13 percent and 17 percent in 2023 and 2024

Trump gloated about his one-upmanship of Xi Jinping in a post to Truth Social early Thursday morning: ‘What a day, but more great days coming!!!’ 

Beijing will also likely impose further export controls on products needed by American companies to make chips and other products, and slapping them down with intimidating regulatory investigations and penalties. 

The blacklists are also likely to increase in an attempt to force U.S. firms to give up intellectual property or be banned from doing business in China. 

That could be perilous, as 200 American companies have stated in recent years that China is their top source of geopolitical risk, according to a U.S. Chamber of Commerce Foundation report.  

China’s state media has remained on message, with the Chinese Commerce Ministry saying: ‘If the U.S. insists on its own way, China will fight to the end.’

Beijing has also looked to Southeast Asian countries like Cambodia, Laos and Thailand to make up trade deficits.  

Already, Chinese companies are getting cancelations from their American counterparts.

After Trump’s additional tariff hike, the head of a toy-making factory in Guandong province said a client in Baltimore immediately canceled a March order that was slated to ship in June, apologizing to him in Chinese. 

Trump gloated about his one-upmanship of Xi Jinping in a post to Truth Social early Thursday morning: ‘What a day, but more great days coming!!!’

Chinese companies who had previously responded to Trump’s tariffs by offering discounts to longtime clients are willing to forego the American market entirely as they attempt to find new buyers

The nation has spent nearly $2trillion in building factories, with carmakers a huge focus

The cancelation came after Chen had offered his American client – who he had worked with for over a decade – a 10 percent discount in response to the initial tariffs. 

However, he called the newest increases ‘a deal-breaker’ and said that there was ‘no room for doing business anymore, for both sides.’

‘We’re both very sad, but just can’t do anything about it,’ he told WSJ, adding that more cancelations are likely coming on a large scale.

Clothing and machinery factories have told the New York Times they’re worried about future orders and whether workers will have jobs in the coming weeks.  

Shipments from China to the United States could be cut in half in the future if the tariffs stick, according to Capital Economics.  

While many Chinese factories copied Chen and offered discounts, the new tariffs have created a red line, with some saying they’re going to take the hit and lose orders from American companies, who have asked for double and triple the discounts Chen gave.

Instead, they will try to find buyers in other countries or even slow or stop production to try and put the burden on American importers.  

Already, experts are anticipating prices for Apple products – most of which are made in China – to skyrocket.   

Chinese companies had offered longtime clients discounts after Trump (pictured) announced his initial tariffs but the new duties slapped on China have been a red line

Ultimately, China may attempt to fight this war by attempting to build from within.

The country has transitioned in recent years from heavily funding the construction of housing to building factories to the tune of almost $2trillion in financing.  

Chinese carmaker BYD is in construction on two plants that would be larger than the world’s current biggest, Volkswagen in Germany. 

They have also focused on factories that produce cars, phones and even fertilizer, meant to ship across the globe. ‘

Exports make up 20 percent of China’s GDP to go along with export increases in the past two years.

On the other hand, American exports have dropped, making up only 11 percent of GDP, down from 13.6 percent in 2012. 

The U.S. Trade Representative said that American exports to China went down three percent in 2024, a value of $144billion.

America’s trade deficit with China increased to $295billion.   

Trump is hoping Apple boss Tim Cook (pictured left) will fire up domestic production of the iPhone to help the United States win the trade war 

Trump has signaled the US could respond by firing up domestic production of the likes of the iPhone, buoyed by Apple’s decision to invest $500 billion to expand its facilities Stateside over the next four years. 

But Harry Mills, founder of specialist currency management firm Oku Markets, told DailyMail.com: ‘This would take a Herculean effort of coordinating an enormous supply chain relocation, and would surely lead to price increases in the long term as US labor costs would be markedly higher than in China and Taiwan. 

Most of Apple’s devices are made in China but the parts involved come from a staggering array of nearly 50 countries – all of which have seen tariffs slapped on them by Donald Trump.

Analysis of Apple company supplier information shows 84 percent of iPhone component suppliers have some links to mainland China, at 158 out of 188 suppliers. 

Trump was forced to backtrack on his sweeping tariff plans because of a ‘fire sale’ in the bond market which could have triggered economic meltdown but taking China to task for its disrespect. 

Alongside causing turmoil in the stock market, Trump’s sweeping tariff plans sparked a major US government bonds sell-off, the likes of which had not been seen since the depths of the Covid-19 crisis. 

Experts are saying that it was this, rather than simply the ‘art of the deal,’ which caused the White House to backtrack on its tariff proposals. 

On Wednesday, the President announced a 90-day pause on all new ‘reciprocal’ tariffs, in a major reversal which caused one of the biggest stock market rallies in history. 

On Wednesday, the President announced a 90-day pause on all new ‘reciprocal’ tariffs , in a major reversal which caused one of the biggest stock market rallies in history, but did not spare China

He did not spare China, however, instead slapping Beijing with yet another round of import taxes. 

‘Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately,’ he wrote. 

‘At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.’

The ‘fire sale’ in the bond market came to a head late on Tuesday and into Wednesday. 

The 10-year Treasury yield climbed overnight above 4.51 percent, while the 30-year Treasury yield hit a high of 5.02 percent on Tuesday night, CNBC reported.   

US government bonds have traditionally been seen as one of the world’s safest assets, and as a place where investors can put their money in times of volatility.

But the sudden fall was one of the clearest signs yet that investors may be beginning to lose confidence in their safe haven status – and an indication of just how much the world’s biggest economy was shaken by Trump’s tariff plans.

Treasury Secretary Scott Bessent insisted that the decision to delay tariffs was driven by ‘the president’s strategy’, rather than the shocking rise in bond yields. 

‘He and I had a long talk on Sunday, and this was his strategy all along,’ he told reporters outside the White House on Wednesday. 

But Trump himself said he was watching the bond market closely as he decided to implement the pause. ‘The bond market right now is beautiful,’ Trump told reporters.

‘I saw last night where people were getting a little queasy.’