As tensions escalate in the US-China trade war, both sides are firing back with steep tariffs—up to 245% on Chinese goods from the US, and 125% on American products entering China.
But while Washington tries to pressure Beijing, China is far from defenseless.
From rare earths to global alliances, here are five strategic advantages China is holding close in this high-stakes economic battle.
1. China Can Absorb More Economic Pain (For Now)
Unlike US President Donald Trump, Chinese President Xi Jinping doesn’t face elections. That gives him more flexibility to absorb economic hits without worrying about public opinion—at least in the short term.
China’s massive domestic market helps cushion some of the blow to its exporters. With over a billion consumers and targeted incentives (like subsidies and travel perks for retirees), Beijing is trying to boost spending from within. Nationalist messaging in state media is also helping frame the trade war as a patriotic struggle.
Still, ongoing issues like youth unemployment and the real estate crisis make long-term pressure a serious concern for Chinese leadership.
2. China Has Been Investing in the Future
China is no longer just the world's factory—it's racing ahead in tech innovation.
The country has poured billions into AI, electric vehicles, and chipmaking. Homegrown companies like BYD (now the world's top EV seller) and DeepSeek (a rival to ChatGPT) are showing serious global potential. And Apple is now losing ground in China to local brands like Huawei and Vivo.
Despite US efforts to move supply chains elsewhere, China’s infrastructure, scale, and skilled workforce are hard to beat. Years of preparation have made it ready for long-term economic battles.
3. China Has Diversified Trade Partners
Beijing has worked hard to reduce its dependence on the US. After earlier rounds of tariffs, it doubled down on the Belt and Road Initiative and strengthened ties with South East Asia, Africa, and Latin America.
Today, China is the top trading partner for more than 60 countries. South East Asia—not the US—is now its largest export market. For example, Brazil has replaced the US as China’s main soybean supplier.
This shift allows China to soften the blow of American tariffs and gives it leverage in negotiations. As one analyst put it, “It’s harder than ever to back China into a corner.”
4. It Knows When Trump Will Blink
After Trump announced steep new tariffs in April 2025, the US bond market reacted badly. A sudden sell-off of US government bonds forced Trump to pause most of the tariffs for 90 days.
That was a signal to Beijing. China holds $700 billion in US Treasuries—the second-largest stash after Japan. While selling them would hurt China too, the psychological pressure on US markets is real.
Still, experts caution that bonds are a bargaining chip, not a financial weapon. China won’t risk destabilizing the yuan or its own investments unless absolutely necessary.
5. China Has a Chokehold on Rare Earths
Perhaps China’s strongest card is its near-monopoly on rare earth elements—materials vital for making smartphones, EVs, wind turbines, and military tech.
China controls over 60% of global production and more than 90% of refining. It recently restricted exports of seven key rare earths in response to Trump’s tariffs, rattling global markets.
Countries like Australia, Japan, and Vietnam are trying to ramp up their own supply chains, but it could take years to catch up. In the meantime, China’s grip on these critical materials gives it major influence over high-tech industries.
Bottom Line
The US may have economic power, but China has options—and it’s using them. From reshaping global trade to tightening control over key tech resources, Beijing is playing a long game.
As the world watches the trade war unfold, one thing is clear: this isn’t a battle China plans to lose quietly.
