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Outside the business community, the general Chinese people have felt the after-shocks of the trade tensions. Most factory workers, specifically those who are in export-based industries, have felt job insecurity as companies scale down or outsource their activities somewhere else. Manufacturing-based cities such as Dongguan and Shenzhen have seen changes in jobs, producing economic problems for blue-collar employees and their households. Imported commodity prices—importantly American farm products like soybeans—have changed consumer prices, increasing the pressure on household expenditure. The Chinese government reacted with policy measures to lessen domestic employment and consumption, yet stability problems of the economy remain, specifically for the younger working age population that will see a more competitive labor market.
The higher geopolitical tensions have also created more nationalism in some parts of society, where state media created the narrative of China’s economic strength under siege (Kuo). Despite these issues, China’s manufacturing sector has been strong, with February seeing the fastest expansion in three months. The official manufacturing purchasing managers’ index (PMI) rose to 50.2 from 49.1 in January, meaning expansion. This growth is happening because of a surge in new orders and production rebound after the spring festival holiday.
But the chance of higher U.S. tariffs in the future leaves near-term export demand unknown, which could divert surplus to other markets and impact the world’s economic balance. While short-run increases in production data means maybe a degree of stability, long exposure to trade tensions can slow down Chinese manufacturing in the long run, specifically if foreign direct investment weakens.
The tariffs have also affected Chinese stocks in a bad way on U.S. exchanges, with investors reacting to the chaos of U.S.-China trade relations. For example, Alibaba Group Holding Ltd (BABA) fell by approximately 2.97%, with its stock price at $132.51. JD.com Inc (JD) also fell by 1.50%, trading at $41.90. PDD Holdings Inc (PDD) has seen a stronger decline of 4.21%, with stocks trading at $113.69. These show investor fear of the increasing trade tensions and how they could affect these firms’ income. Since most Chinese e-commerce and technology companies have strong dependence on international supply chains and demand from foreign markets, ongoing trade restrictions could add more downward pressure on stock performance. In the future, if the U.S. government keeps increasing tariffs, Chinese society will need to make more economic changes.
Producers may accelerate diversification plans, seeking bases for production beyond China to decrease tariff impacts. Most companies have already started moving production to Southeast Asia, specifically Vietnam, Thailand, and Indonesia, to avoid direct exposure to U.S. tariffs. Also, more policy measures that are supposed to be encouraging domestic demand to work against decreasing export revenues will happen I think. The Chinese government has already started policies like tax relief and infrastructure investment to increase domestic consumption. However, income inequality and economic disparity will rise, specifically with lower-income workers struggling to adapt to the evolving labor market. If firms continue to shed jobs or outsource overseas, social instability would become worse, specifically with blue-collar employees and young graduates who will have problems to find secure employment.
The US-China trade tensions have now taken over the relationship between the two nations, imbuing it with a complicated and volatile dynamic. The tariffs standoff, and the threat of additional ones to come, has created a culture of tension/district that makes it harder for the two nations to work together on other problems in the world. This tension goes beyond the economic; it infects the political and diplomatic things as well. The real possibility of an all-out trade war looms on the horizon, threatening to shadow the world economy and keep businesses and investors on edge everywhere. This is more than a discussion about tariffs/trade, it’s about geopolitical power.
China’s own economic rise and growing international role have changed the balance of power, making the relationship more competitive and sometimes confrontational. The present trade tensions are a test of both countries’ ability to manage their differences and find a way out. The stakes are high not only for the two nations directly in this dispute, but for the world generally, because the well-being of the US-China relationship is very important for world trade, security, and cooperation. The current situation shows the deep rooted problems of dealing with a relationship between two great powers with different economic and political systems. Although tensions have not really increased a huge amount since the last presidency, because of the fact that Biden had an aggressive relationship with China, maybe just as aggressive or even more than Trump did in his first time, the stakes are now higher.
Since 2021 when Trump left office, China is now more authoritarian than it last was, which makes every act of tension caused by the new unpredictable American President all the more dangerous. Trump’s unpredictable and sometimes extreme actions are also much more important now because China is in a vulnerable position. Trump’s unpredictability is maybe the most important factor in the equation, because it is less likely China would lash out in the case of a Biden presidency if it knew the amount of resistance and backlash it would face, but by the end of Feb China understands how the past world order has really fallen and that China might not be sanctioned at all or anything if it attacks Taiwan, or very severe sanctions might happen, and this is because of a new system we are entering in which strongmen like Trump make the rules and make quick important decisions that decides how the world works, instead of the previous system in which international rules and things like that determined how the world worked and how countries acted.
Fresh US-China tariffs and tensions mean a bigger risk in the current landscape for several other reasons, importantly China’s greater unpredictability as it losses economically and geopolitically. As China faces less economic growth and declining population, it may become more likely to lash out to protect its position in the world, raising the stakes of miscalculations and escalations in trade tensions. Also, the already chaotic global environment means a dangerous backdrop where more tariffs would have the possibility to destabilize the world economy even more and heighten the risk of a miscalculation.
The danger that these tariffs might mean is a broader decoupling of the US and Chinese economies and is another risk, one that would have maybe a very bad situation for both nations and the world economy. So tariffs are a policy tool, but their use in today’s world demands extremely cautious use and a strong understanding of the risks. Relations could improve, as Trump did from time to time with several countries when he was last President, but he also had moments when relations suddenly became a lot worse and this caused tensions, and maybe even more dangerous events to almost happen before they were stopped.
Since China’s economy heavily relies on exports, this makes the situation even more dangerous. As the “world’s factory,” it uses export money to buy crucial raw materials and energy. Exports also means job creation, technological advancement, and building foreign exchange reserves (money) used for investment and currency management.
Basically this all means that Tariffs will impact China more than it might impact a different country. That means that every Tariff should be analyzed more than they have been before, and they should be implemented more because the stakes are so much higher this time.
Works Cited:
Bicker, Laura. “Beijing Hits Back – Can China and US Avoid Trade War Escalation?” BBC News, 4 Feb. 2025, https://www.bbc.com/news/articles/czrl053kez3o.
“China ‘under siege’ | Key issues for the China–US relationship.” Chatham House, 2024, https://www.chathamhouse.org/2024/07/china-under-siege/key-issues-china-us-relationship.
Kuo, Lily. “Chinese Manufacturing Returns to Growth Despite Threat of Higher Trump Tariffs.” The Guardian, 2 Mar. 2025, www.theguardian.com/business/2025/mar/02/chinese-manufacturing-surges-despite-threat-of-higher-trump-tariffs.
Lockett, Hudson, and Colby Smith. “China’s Small Exporters Look for Plan B as Trump Quashes Trade Loophole.” Financial Times, 2 Mar. 2025, www.ft.com/content/3b4eb6d8-8a55-416d-8950-813288f29711.
Kuepper, Justin. “China ETFs, Stocks Slump on Trump Plan to Double Tariffs.” Investopedia, 2 Mar. 2025, www.investopedia.com/china-etfs-stocks-slump-on-trump-plan-to-double-tariffs-11688265.
