US Slams China With 125% Tariff: Is the World Ready for a New Trade War? | TDG Explainer

In a strategic  move, US President Donald Trump declared a 90-day hiatus on his comprehensive tariff policy—except for China. While more than 75 nations will receive temporary reprieve, Trump has raised duties on Chinese imports from 104% to a staggering 125%, citing Beijing’s retaliatory 84% tariffs on American goods. This development underscores the new geopolitical game plan: to economically isolate China while reshaping global trade around US-aligned nations.

The question at the heart of it is—can China survive this tariff barrage, and what does it mean for the world economic order?

Background of Tariff escalation

This is not Trump’s first try at rebalancing trade with China. In his first term, the US launched waves of tariffs to stem China’s trade supremacy. Following a temporary slowdown under President Joe Biden, Trump’s return to the White House has rekindled tariff wars—this time with greater ferocity.

Trump’s justification still lies in the perception that China has “ripped off” US industry for decades through market manipulation, intellectual property rights violations, and dumping cheap exports into the US. The 125% tariff, he asserts, is the “price China has to pay” for its retaliatory trade measures and lack of market transparency.

Why US paused tariffs for other countries ?

Trump’s government opted to suspend tariffs on most US allies and neutral trading partners because of two primary pressures: domestic economic pressure and international diplomatic campaigning.

Business America threatened losses to US supply chains and manufacturing. More significantly, a severe bond market sell-off created self-inflicted fear. Treasury Secretary Scott Bessent cautioned Trump that a long trade standoff would push the economy into a recession.

This brought a temporary peace: a universal 10% “reciprocal tariff” stays on all nations, but sterner penalties are put on the backburner—except for China.

Why US is targetting China primarily ?

China is the only and main target of Trump’s economic wrath. There are several reasons for that:

Trade imbalance: China has a $383 billion trade surplus against the US.
Manufacturing dominance: China dominates more than 60% of the world’s EV market and 80% of battery manufacturing.
Political competition: The US views China’s state-supported economic system as being incompatible with open and equitable trade.

Trump spoke bluntly on Truth Social:

“At some point, hopefully in the near future, China will realise that the days of ripping off the US and other countries is no longer sustainable or acceptable.”

This is not only about economic coercion. It’s about dismantling China as the world’s manufacturing hub—and substituting it with an American-directed network of trading partners.

Can Beijing survive 125% tariffs?

This is the real question. China’s economy is already reeling from declining exports, a weak property market, and anaemic domestic consumption.

A 125% tariff puts immense pressure on Chinese exporters. Analysts estimate it could knock off 2–3 percentage points from China’s annual GDP growth. Factories dependent on the US market may be forced to cut output or relocate.

But China retains cards. It possesses profound foreign reserves, diversified international trade relations (including the BRICS+ alliance), and the power to provide huge domestic stimulus, if necessary. Beijing might weather the short-term tempest, but at a high price.

China’s response and countermeasures

China didn’t pull its punches. It imposed tariffs on all US imports to 84% and lodged a complaint with the World Trade Organization (WTO). The Chinese Commerce Ministry labeled Washington as “unilateral bullying” and committed to protect its interests.

Apart from trade retaliations, China initiated non-economic actions:

• Boycott 18 American defense companies.
• Issued travel advisories for Chinese travelers going to the US.
• Warned students and academics to “heightened risks” at US universities from new foreign influence legislation in states such as Ohio.

State media, spearheaded by CCTV and Global Times, positioned China as strong and virtuous—depicting the US as world bully disrupting markets.

Impact on global markets and trade alliances

The short-term fallout was drastic. The S&P 500 fell close to 4% following the increase in tariffs, getting close to bear market territory. Bond yields swung wildly. Asian markets came along, and Hong Kong’s Hang Seng Index fell by 3.5%.

Oil prices fell in fear of a recession. The dollar strengthened versus most currencies as investors flocked to safety.

But behind the numbers, the larger picture is a global reset of trade.

Trump’s action is likely to prod nations to take sides. The US is making a gentler offer to nations that join its new trade regime. China is doubling down on BRICS, Africa, Latin America, and domestic autarky.

If the polarization persists, we will see a bifurcation of the global economy, with simultaneous trade networks—one revolving around the US, and the other centered around China.

Trump’s 125% China tariffs mark more than just a trade skirmish—they reflect a wider geopolitical gambit to sideline China and reshape global commerce. While other countries enjoy a temporary truce, Beijing faces its most direct economic confrontation yet.