China Unleashes a Trade War Arsenal

Summary

Podcast Summary: The Journal – "China Unleashes a Trade War Arsenal"

Release Date: April 10, 2025
Hosts: Kate Linebaugh and Ryan Knutson, with Ling Ling Wei
Produced by: The Wall Street Journal & Gimlet

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Introduction

In the episode titled "China Unleashes a Trade War Arsenal," hosts Kate Linebaugh and Ryan Knutson delve into the escalating trade tensions between the United States and China. Joined by expert Ling Ling Wei, they dissect the recent tit-for-tat tariff escalations, the strategic moves by both nations, and the broader implications for the global economy.

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Escalation of the Trade War

Initiation and Early Retaliations

The trade war intensified rapidly over the past week, commencing with the U.S. announcing a 34% reciprocal tariff on Chinese imports. This move was met with immediate retaliation from China, imposing identical tariffs on U.S. goods.

[00:05] Kate Limbaugh: "China announcing retaliatory tariffs of 34% effective April 10. Then the U.S. countered China's counter retaliation with a 104% tariff on Chinese imports."

Further Escalations

The conflict didn't stop there. The U.S. introduced a 104% tariff on Chinese imports, prompting China to respond with an 84% tariff on all U.S. goods entering China. The cycle of retaliation continued, with President Trump pausing tariffs on other countries but intensifying those against China.

[00:57] Ling Ling Wei: "The tariff on China will now go up to 125% because China imprudently decided to retaliate against the United States."

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China's Strategic Position and Leadership Response

Xi Jinping's Stance

China's unwavering stance under President Xi Jinping has been a focal point of discussion. Ling Ling Wei emphasizes that Xi shows no intention of backing down, signaling a determination to withstand economic pressures.

[01:18] Ling Ling Wei: "The Chinese leader Xi Jinping has shown no sign of backing down. If anything, he's doubling down."

Economic Implications

The imposition of high tariffs from both sides threatens not only their national economies but also the global market. Ling Ling Wei highlights the interconnectedness of the world's two largest economies and the resulting ripple effects.

[01:51] Ling Ling Wei: "We're talking about two ginormous powers fighting against each other. The impact, the direct impact, indirect impact, ripple effects, you know, just everywhere."

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Diplomatic Efforts and Communication Breakdown

Initial Optimism Post-Inauguration

Initially, there was cautious optimism from China regarding the new U.S. administration. President Trump's invitation to President Xi Jinping and the delay in implementing tariffs suggested potential for negotiation.

[03:34] Ling Ling Wei: "There was actually a sense of cautious optimism... they actually held off doing that on day one."

Communication Challenges

Despite attempts to open dialogue, communication between the two nations faltered. High-level engagements were elusive, with critical conversations either not materializing or being undermined by mistrust.

[05:20] Ling Ling Wei: "Wang Yi basically issued quite a warning to Rubio... that really put the Chinese on a bad start."

Failed Engagements

Multiple attempts by Chinese officials to engage with U.S. counterparts were unsuccessful. Meetings were either not granted or lacked meaningful dialogue, further deepening the divide.

[07:11] Ling Ling Wei: "Foreign Minister Wang Yi wanted to talk to National Security Adviser Mike Watts, but he had no luck."

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Trade War Intensifies: "Liberation Day"

Dramatic Tariff Increases

On Liberation Day, a significant escalation occurred. President Trump announced an increase of tariffs on China to 125%, while pausing tariffs on other countries to 10% for 90 days.

[10:23] Ling Ling Wei: "Yeah, everyone was surprised."

[14:06] Kate Limbaugh: "Trump increased tariffs on China again on top of the already existing tariffs."

China's Strong Retaliation

In response, China unleashed a comprehensive set of countermeasures, including an 84% tariff on all U.S. goods, addition of defense companies like Dupont to a blacklist, suspension of imports of certain American products, and strategic restrictions on rare minerals.

[12:05] Ling Ling Wei: "China now saying it's not going to be sending some of the rare minerals over to the United States."

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Economic and Global Implications

Impact on U.S. and Chinese Economies

Both economies face significant threats. The U.S. has leverage due to its robust economy, but China's authoritarian system allows it to sustain long-term pressures without the same level of internal accountability.

[15:27] Ling Ling Wei: "The US actually has quite some leverage over China, mainly based on how strong the US Economy is."

Global Economic Ripple Effects

The decoupling of the world’s two largest economies harbors extensive repercussions across global markets, affecting trade flows, supply chains, and international relations.

[01:51] Ling Ling Wei: "The global economy is at stake as well."

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Potential Paths Forward and Future Outlook

Possible Off-Ramps

Ling Ling Wei suggests that diplomatic engagement, such as direct communication between Trump and Xi Jinping, could de-escalate tensions. However, both sides have entrenched positions, making negotiations challenging.

[16:34] Ling Ling Wei: "Xi Jinping would be pausing the tariff increases or even just Trump picking up the phone to call Xi Jinping."

China's Defiant Stance

China remains resolute, with its Commerce Ministry declaring a willingness to "fight to the end" if the U.S. continues its assertive stance.

[16:17] Kate Limbaugh: "China's Commerce Ministry struck a defiant tone saying, 'If the US insists on its own way, China will fight to the end.'"

Long-Term Strategies

China has been preparing for such scenarios, developing a comprehensive "playbook" to mitigate the impact of future trade conflicts. This includes reducing dependency on Chinese components in critical industries like medicine, electronics, and chip manufacturing.

[12:42] Ling Ling Wei: "They definitely do... prepared for another Trump-like assault."

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Conclusion

The episode underscores the perilous trajectory of the U.S.-China trade war, highlighting the strategic maneuvers, communication breakdowns, and profound economic impacts on both nations and the global economy. As both countries remain steadfast, the international community watches closely, recognizing that the resolution or escalation of this conflict will have far-reaching consequences.

[17:30] Kate Limbaugh: "Today China announced it would reduce imports of American movies... U.S. stock markets down sharply."

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Notable Quotes:

• Kate Limbaugh [00:05]: "China announcing retaliatory tariffs of 34% effective April 10."
• Ling Ling Wei [00:57]: "The tariff on China will now go up to 125% because China imprudently decided to retaliate against the United States."
• Ling Ling Wei [15:27]: "The US actually has quite some leverage over China, mainly based on how strong the US Economy is."
• Ling Ling Wei [16:34]: "Xi Jinping would be pausing the tariff increases or even just Trump picking up the phone to call Xi Jinping."

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Final Notes

This episode of The Journal provides an in-depth analysis of the complex and evolving trade tensions between the U.S. and China, offering listeners a comprehensive understanding of the strategies, consequences, and potential future developments in this high-stakes economic conflict.

Transcript

[Kate Limbaugh]

In the last week, the US China trade war has spiraled. It started in the Rose Garden. So we're going to be charging a discounted reciprocal tariff of 34%. I think in other words, they charge us, we charge them. We do have some breaking news right now from China. And China hit back. China announcing retaliatory tariffs of 34% effective April 10. Then the U.S. countered China's counter retaliation. Now a 104% tariff on Chinese imports. Then China countered the U.S. s counter counter retaliation, an 84% hit on all U.S. goods coming into China. And then yesterday, President Trump paused tariffs on most other countries, with one big exception.

[Ling Ling Wei]

The tariff on China will now go up to 125% because China imprudently decided to retaliate against the United States. And as I said, there has been quite a sense of shock, frustration and anger in Beijing.

[Kate Limbaugh]

That's our colleague Ling Ling Wei. How far is China willing to go?

[Ling Ling Wei]

Well, it all comes down to who buckles from the pain first. For now, the Chinese leader Xi Jinping has shown no sign of backing down. If anything, he's doubling down.

[Kate Limbaugh]

We have the world's two biggest economies now in a full blown massive trade war. How can this end and what will it mean for the global economy given.

[Ling Ling Wei]

How high the US Tariffs on China are right now? Basically, the US Market is closed to China, so China will have a very, very hard time selling to the United States. That would obviously hurt China's growth even more. Both countries economy is at stake and also global economy is at stake as well. We're talking about two ginormous powers fighting against each other. The impact, the direct impact, indirect impact, ripple effects, you know, just everywhere.

[Kate Limbaugh]

Welcome to the Journal, our show about money, business and power. Power. I'm Kate LIMBAUGH. It's Thursday, April 10th. Coming up on the show, how the U.S. china trade war spun out of control.

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[Kate Limbaugh]

Going back to inauguration day this year, how is China feeling about its relationship.

[Ling Ling Wei]

To the U.S. the Chinese felt pretty good about the new administration. There was actually a sense of cautious optimism. That was because right before the inauguration day, President Trump actually invited President Xi Jinping to go to Washington to attend a ceremony. So, you know, that looked pretty good to Beijing. And at the same time, despite Trump's campaign promise to hit China with 60% tariffs, he actually held off doing that on day one. So there were, you know, some really kind of warm and fuzzy signs at the very beginning.

[Kate Limbaugh]

After Inauguration Day, China tried to open up communications with the Trump administration. They knew Trump had promised more tariffs, but China remained hopeful that they could negotiate on trade and still do business. China's Foreign Minister Wang Yi, made a phone call to his newly appointed American counterpart, Secretary of State Marco Rubio. Rubio is a known China hawk.

[Ling Ling Wei]

It was quite to the dismay of the Chinese leadership, Rubio was actually picked and confirmed as the Secretary of State. He's quite a foe, and now he's taking a very important position in the administration. But, you know, you just have to deal with it. Basically, you know, the message was, even though we don't like you, we're sort of like foes, but we're still willing to get down to business with you.

[Kate Limbaugh]

This simple diplomatic introductory call ended well, but it turned out there was something off.

[Ling Ling Wei]

Based on the official readout, Chinese readout of the call, Wang Yi basically issued quite a warning to Rubio. The term Wang Yi used was that can be translated into something like behave yourself. Right? So it was, you know, basically Wang Yi lectured Rubio during the call.

[Kate Limbaugh]

That warning for Rubio to behave himself was touted in China, but it wasn't included in the English translation of the call.

[Ling Ling Wei]

So the White House obviously took notice of that. And, you know, that really put the Chinese on a bad start. That kind of really didn't go well with the administration.

[Kate Limbaugh]

Then in early February, Trump hit China with 10% tariffs across the board. China's response was relatively mild, answering back with similar sized tariffs on specific US Imports.

[Ling Ling Wei]

The Chinese definitely were trying to engage with the administration at that point of time. In fact, they have been trying to get to the core team of the Trump administration. They really want to talk to cabinet level officials. However, they have had no luck whatsoever. Some lower level communication has been taking place. However, higher level communication really has gone dark.

[Kate Limbaugh]

Do you have examples?

[Ling Ling Wei]

Sure. So in late February, the Foreign minister who just talked about Wang Yi, he flew to New York. On the surface, he was here to attend a United Nations Security Council meeting. But there was a much bigger goal for him, which was to have a meeting with senior officials at the Trump administration. In particular, Foreign Minister Wang Yi wanted to talk to National Security Adviser Mike Watts, but he had no luck. He didn't get a meeting with him. He didn't even get a call with him.

[Kate Limbaugh]

According to one of Ling Ling's sources, Waltz didn't meet with Wang Yi in part because of that warning that had been delivered to Rubio. The Chinese pursued other avenues into the administration and also had no luck. The Chinese ambassador to Washington had tried to engage with Elon Musk and failed. The Chinese commerce minister wrote letters to the U. S. Commerce secretary and the U. S. Trade representative. No response. Ling Ling says the White House wanted communication from higher levels in Beijing.

[Ling Ling Wei]

The Trump administration, to their credit, they know China pretty well these days. They know who in China is more important than others. And they basically told the Chinese, okay, you want to talk, sure, but we want to talk to the people who really close to Xi Jinping. But to the Chinese, that demand was something they couldn't really agree to because that's not how China works. You know, they have very established ways of doing things and they didn't want to improvise or they do not have the ability to improvise. So basically what China is offering for conversations is not in line with who the Trump administration wants to talk to.

[Kate Limbaugh]

But it seems like it's going both ways, like both sides are making efforts to communicate, but those efforts weren't going.

[Ling Ling Wei]

Anywhere, especially on China's part. They definitely made a quite a big effort.

[Kate Limbaugh]

China remained hopeful that negotiations were possible. So in March, when Trump laid another 10% tariff on Chinese imports, again, Beijing didn't retaliate much. And then last week, any glimmer of hope that Beijing had that the bilateral relationship could be maintained went out the window. My fellow Americans, this is Liberation Day. Waiting for a long time liberation. And I remember your tweet from that day.

[Ling Ling Wei]

Oh, I better work out what I treat.

[Kate Limbaugh]

Yeah. So now average U.S. tariffs on China are over 70%. Wow.

[Ling Ling Wei]

Yeah.

[Kate Limbaugh]

You were surprised too.

[Ling Ling Wei]

Like everyone else, I think everybody was surprised.

[Kate Limbaugh]

On Liberation Day, Trump increased tariffs on China again on top of the already existing tariffs. What was Beijing's experience of that day?

[Ling Ling Wei]

That was quite a shock to people in Beijing. And they did expect the Trump administration to do something to increase tariffs even further. But the magnitude of the tariff increase completely surprised the Chinese leadership.

[Kate Limbaugh]

How China responded is after this break, Trump's so called Liberation Day tariffs sparked a huge response from China.

[Ling Ling Wei]

This time around, they also hit back quite hard. They put retaliatory tariffs on all American products.

[Kate Limbaugh]

With no exception, China is raising its retaliatory tariffs against the US to 84%. They've added some defense Companies to their so called blacklist. Dupont, according to the market regulator, is.

[Ling Ling Wei]

Now under investigation for allegedly violating the.

[Kate Limbaugh]

Country'S anti monopoly law.

[Ling Ling Wei]

China now saying it's not going to.

[Kate Limbaugh]

Be sending some of the rare minerals over to the United States. The Chinese have suspended imports of five agricultural firms. The Chinese allege that these American products.

[Ling Ling Wei]

Failed and they have done quite a lot. It's not just one thing. So what Beijing is doing right now is kind of deploying a very broad set of countermeasures to engage in this economic warfare with the United States.

[Kate Limbaugh]

It sounds like they had a playbook ready to go.

[Ling Ling Wei]

Yes, they definitely do. And they started to put together this playbook ever since Trump left office in 2020. So Xi Jinping's government has been preparing for another Trump like assault for all those years. And all sorts of tools are all aimed at hitting the United States where it hurts. A lot of people just cannot produce stuff these days without Chinese components. Right. For medicine that we consume here, for iPhones. Right. And for chips, they all require components from China.

[Kate Limbaugh]

That's what China is doing to the US Directly. What else is China doing to kind of undermine the US on the global stage right now?

[Ling Ling Wei]

Because Trump's trade war is much broader than just with China. Right. The risk is that a lot of other countries will be pushed into the arms of the Chinese. So China definitely has an opportunity to try to win over some of the traditional allies and partners of the United States.

[Kate Limbaugh]

Ling Ling, we have some breaking news here. As I spoke with Ling Ling yesterday, Trump's broader trade war took a dramatic turn. Trump has just posted on Truth Social quote 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%.

[Ling Ling Wei]

What? Just now?

[Kate Limbaugh]

Just now. And at the same time he's going to pause the other retaliatory tariffs on all the other countries to 10% for 90 days.

[Ling Ling Wei]

This is the worst case scenario for China. Kate, that makes very clear who is the main target for the Trump administration is China. And that makes it very, very, very difficult for China to negotiate with other countries to try to have any kind of alignment to confront the United States. So it's really the worst case scenario for Beijing right now.

[Kate Limbaugh]

Does this mean the US has the upper hand?

[Ling Ling Wei]

I do believe the US has the upper hand with this move. The US actually has quite some leverage over China, mainly based on how strong the US Economy is.

[Kate Limbaugh]

Who buckles from the pain first I.

[Ling Ling Wei]

Think right now, still too early to say both of them have shown their resolve and capacity to hit back at each other. But China has its own cards as well, right? Its political system, you know, such an authoritarian system. That means its leadership doesn't to be held accountable. They definitely are in a better position to play the long game.

[Kate Limbaugh]

China's Commerce Ministry struck a defiant tone saying, quote, if the US Insists on its own way, China will fight to the end. What could be an off ramp in this trade war, an off ramp for.

[Ling Ling Wei]

Xi Jinping would be pausing the tariff increases or even just Trump picking up the phone to call Xi Jinping. I bet if Trump takes the initiative, makes a call, Xi Jinping would pick it up. Because after all, economic pressure in China is building even before the trade war started, now even more so. So Xi Jinping definitely still has incentives to deal, to negotiate, to have dialogue. What Xi Jinping wants to avoid at the end of the day is to get isolated by Trump's policies.

[Kate Limbaugh]

And I guess we're going to have to find out what China does after this.

[Ling Ling Wei]

Yes, I think China will retaliate. That's my bet.

[Kate Limbaugh]

Today China announced it would reduce imports of American movies. In response, President Trump said, I think I've heard worse things. The administration also said today the new tariffs on China add up to a total of 145%, not the 125% it previously indicated. That news sent U.S. stock markets down sharply. That's all for today. Thursday, April 10th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Gavin Bade. Thanks for listening. See you tomorrow.