Trump transforms tariff war into high-stakes showdown with China

By pausing global tariffs against dozens of countries and raising them on China, President Trump has set up a high-stakes showdown in hopes he can pressure Beijing into a face-saving deal after weeks of global turmoil.

There is little sign so far, though, that Chinese leader Xi Jinping is ready to buckle.

Trump announced Wednesday on social media that tariffs on Chinese goods would jump to 125%, saying “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.” So far, Beijing has hit back at each round of tariff increases from the U.S. by raising duties on American products and targeting U.S. companies.

The clash likely means higher costs for U.S. consumers and locks the world’s two largest economies in an extraordinary conflict with no immediately clear offramps.

For Trump, the decision to pause the bulk of his reciprocal-tariff program underscored his growing concern about the economy. But by escalating against China, he has avoided a full retreat from his tariff policies, making it even harder to back down against the last remaining target, analysts said.

“I think the Chinese appreciate that and they are more and more suspicious that negotiating will help them. Trump has to have a win on China,” said Derek Scissors, a senior fellow at the American Enterprise Institute.

For Xi, caving to the U.S. under such pressure is a nonstarter, say people who consult with senior Chinese officials. The Chinese leader will continue to respond to Trump’s escalations with a bare-knuckle approach that makes a prolonged fight even more likely.

“China is unlikely to change its strategy: stand firm, absorb pressure and let Trump overplay his hand. Beijing believes Trump sees concessions as a weakness, so giving ground only invites more pressure,” said Daniel Russel, a former senior State Department official now with the Asia Society Policy Institute.

Trump and Xi appear to be on a collision course in which the Chinese government is prepared to continue retaliating in response to any further escalatory moves by Washington.

“We are on a spiral,” said Steve Tsang, director of the SOAS China Institute in London. “Once it gets started it becomes a contest between two very strong-minded individuals.”

Of the two, Trump sounded the most conciliatory Wednesday, calling Xi a friend and a “very smart guy.” Asked whether he would meet or call Xi, Trump said, “Oh sure I would.”

‘Bad scenario for China’

Attempts to arrange talks between the two leaders have stagnated since Trump took office, despite early positive signs. Trump believes he must deal with Beijing from a position of strength, advisers say.

One possible U.S. move would be to try to isolate China by reaching more favorable trade terms with other countries, including those in Asia, and Trump’s decision to suspend higher duties on dozens of countries could aid that effort.

“This is a bad scenario for China. Everyone else cuts a deal with the U.S. and keeps trading with the U.S.,” said Evan Medeiros, a former senior national-security official in the Obama administration and now a professor at Georgetown University. “China is isolated and facing more pressure.”

Beijing, though, has sought to capitalize on the disruptions Trump’s tariffs have created with longstanding partners.

China has a number of tools to cause economic pain for the U.S. that go far beyond tariffs, analysts said. In addition to further raising its own tariffs, China could consider cutting off its supplies of critical rare-earth minerals.

Beijing could also further court other U.S. trade partners, seeking to use Trump’s gyrating trade policy to position itself as a more reliable partner and potentially squeeze the U.S. out of crucial global markets, including in Europe.

Rerouted Chinese goods

As recently as earlier this week, during a call with European Commission President Ursula von der Leyen, Chinese Premier Li Qiang described the U.S. tariffs on its trading partners as a typical example of unilateralism, protectionism and economic coercion. China’s retaliatory action is intended to not only protect its own interests but also to safeguard the international trading system, he said.

“Protectionism leads nowhere,” Li told Von der Leyen. “Openness and cooperation are the right path for all.”

But with the new U.S. tariffs making the American market all but closed to Chinese products, even more Chinese goods will be rerouted to countries in Europe and Asia, where leaders are already concerned about a flood of Chinese products that have jeopardized jobs. In addition, Beijing has deeply antagonized Europe with its support for Moscow during Russia’s three-year-long invasion of Ukraine.

In contrast with past crises, Xi and the Chinese government have the advantage of being able to clearly blame Trump for starting the trade war, possibly helping Beijing rally the support of Chinese elites and sections of world public opinion.

“The prospects for a negotiated dealmaking were kind of evaporating” before Wednesday’s announcement, said Susan Shirk, director emeritus of the 21st Century China Center at University of California San Diego. “Now I think they are just going to hunker down and make the best of it.”

Write to Lingling Wei at Lingling.Wei@wsj.com, Alex Leary at alex.leary@wsj.com and Jared Malsin at jared.malsin@wsj.com