President Donald Trump’s latest escalation in trade measures against China is casting serious doubt on the possibility of any near-term “grand bargain” between the world’s two largest economies. Economists and analysts now warn that the U.S. is inching closer to a “hard decoupling” from China, a move that could derail trade negotiations and global economic stability.
This week, the Trump administration announced new “reciprocal” tariffs of 34% on Chinese exports, pushing the total levies on Chinese goods to over 60%. These increases come on top of existing tariffs imposed since Trump returned to the White House in 2024.
Economic Fallout and Strategic Risks
The impact on China’s economy could be significant. Analysts at Citi project the new tariffs may shave 2.4 percentage points off China’s GDP growth and reduce exports by over 15% in 2025, unless Beijing launches countermeasures or stimulus programs.
“This represents an extreme scenario — a hard decoupling,” said Citi economists, noting that such a shift may force China to ease monetary policy, adjust exchange rates, and dramatically scale up domestic demand.
According to Miao Yanliang of Chinese brokerage CICC, the tariffs will likely hurt U.S. consumers more than before, as Chinese manufacturers dominate global markets in key sectors, including smartphones (68.5%), personal computers (76%), and toys (65%).
“Producers in China have limited room to cut margins. These costs will be passed on,” Miao explained.
TikTok Deal and Broader Diplomatic Setbacks
The tariffs come at a pivotal moment, with the Saturday deadline approaching for TikTok’s U.S. divestment. Despite earlier signs of flexibility from Beijing, sources familiar with the matter say China withdrew support for a TikTok deal after Trump’s April tariff escalation, stalling negotiations that had appeared close to resolution.
Still, there are indications that both sides remain open to dialogue.
“There will be a point in time to sit down for negotiations,” said Gao Jian, a foreign policy analyst at Tsinghua University.
Sources in Washington and Beijing say China had floated concessions — including fulfilling Phase 1 trade deal obligations and increasing investment in U.S. manufacturing — to avoid harsher tariffs. But those efforts appear sidelined by the growing trade conflict.
Beijing’s Response and Global Implications
In response to the latest tariffs, China’s Ministry of Commerce vowed to take “resolute countermeasures,” though it did not specify actions. Analysts expect China to target U.S. exports further and tighten export controls on strategic resources, such as rare earths.
Already, Beijing has imposed tariffs on $36 billion worth of U.S. goods, including energy, agriculture, and automotive exports. American companies like Illumina and PVH Corp. have also been affected.
Trump’s tariff policy has also reached beyond China’s borders. Vietnam, which has been used as a production base by some Chinese firms, was hit with a 46% tariff, a move that underscores Washington’s intent to limit indirect Chinese trade routes into the U.S.
“The broader U.S. tariff push is already slowing global trade, which inevitably affects China as the world’s top exporter,” said Robin Xing, chief China economist at Morgan Stanley.
Future of China’s Growth Model
Facing mounting pressure, economists argue that China may need to pivot from an export-led model to one based on domestic consumption. This would require a large-scale, targeted stimulus, far beyond the recent budget that set the central government’s deficit at 4% of GDP.
“If China wants to take on a global leadership role in maintaining an open trading system, it will need to rapidly scale up domestic demand,” said Fred Neumann, chief Asia economist at HSBC.
This would benefit trading partners like the EU, Japan, and South Korea, though European leaders remain wary, citing China’s growing trade surplus with the region.
Outlook
Trump’s renewed tariff push, while popular with his political base, has created new obstacles for both sides to forge a broader agreement. With U.S.-China relations strained, the outlook for resolving disputes on TikTok, Taiwan, trade, and investment appears increasingly dim — unless both Washington and Beijing shift course.
In the meantime, the global economy braces for further disruption, with key markets and supply chains caught in the middle of a deepening superpower showdown.
