01.05.2025

China is responding to tariffs with a combination of economic resilience measures, targeted retaliatory actions and strategic diplomatic initiatives

Weathering the tariff storm

Beijing is making great play of the opportunities for its capitalists, as the country attempts to shift away from reliance on the US market. Meanwhile, writes Yassamine Mather, the working class faces absolute exploitation with overtime and excessive hours

In an interview published in Time magazine on April 25, Donald Trump claimed that China’s president, Xi Jinping, had called him to discuss tariffs, adding: “And I don’t think that’s a sign of weakness on his behalf.” Trump claimed that the astronomical US tariffs on Chinese goods will “come down substantially” and promised to be “very nice” at the negotiating table.

However, the call between Trump and Xi was denied by the Chinese ministry of foreign affairs spokesperson: “As far as I know, there has been no recent phone call between the two heads of state,” Guo Jiakun told a regular news conference. “I want to reiterate that China and the United States are not engaged in consultations or negotiations on the tariff issue.”

Frictions

All this unfolds against the backdrop of rising trade friction between the two countries. The United States has levied tariffs as high as 145% on Chinese imports, prompting China to retaliate with duties of up to 125% on American products. Both nations have also adopted supplementary tactics, such as China’s move to limit rare earth mineral exports and the US decision to exempt certain electronics from tariff penalties.

Despite the combative tone, there are signs of the easing of tensions. China has quietly removed steep import duties on selected US goods, including aircraft components and medical devices. However, the absence of formal dialogue and contradictory signals from both governments continue to cast doubt over the stability of global trade dynamics. In public statements, China has continued to uphold its intransigent position on the trade war, even as Trump eased his rhetoric last week.

China is responding to the recent escalation of tariffs with a combination of economic resilience measures, targeted retaliatory actions and strategic diplomatic initiatives. While the immediate economic impact is significant, the long-term effectiveness of these tariffs in altering China’s trade practices remains uncertain. When it comes to retaliatory tariffs, Beijing’s own 125% tariffs on US imports have put pressure on Chinese manufacturers. China is also trying to diversify imports, reducing reliance on American agricultural and energy imports, and using alternatives from countries like Brazil and Argentina. This shift aims to mitigate the impact of tariffs on some essential goods.

Over the last two weeks, commerce minister Wang Wentao has held talks with senior officials from multiple countries, including Malaysia, South Africa and Saudi Arabia, claiming the need for what the People’s Republic calls “enhanced communication and stronger cooperation in times of global economic uncertainties”.

To shore up foreign trade firms, major export-focused localities have come up with tailored policies. For instance, export hub Shenzhen in south China’s Guangdong province has launched a special platform connecting exporters with potential clients across the globe, while Shanghai has established a coordination mechanism to help enterprises go global.¹

Shenzhen Longsys Electronics Co Ltd, a semiconductor memory manufacturer, has expanded its global footprint through strategic acquisitions in recent years - making forays into markets in Latin America and Europe. According to Yao Jiashuai, investment and public affairs director of the company, “Overseas expansion is a long-term commitment, especially amid a complex external environment.”² Building on its global distribution network and supply chains in China, the company reported record global sales for its USB brand, Lexar, last year, while its subsidiary in Brazil also logged strong growth.

China has also made some progress in diversifying its foreign trade markets. According to customs data, China’s trade value with the Association of Southeast Asian Nations bloc rose by 7.1% from a year earlier in the first quarter of 2025, while with the ‘Belt and Road’ partner countries and the European Union it went up 2.2% and 1.4%, respectively.³

We also have the use of selective tariff exemptions. This is mainly aimed at maintaining critical technological imports. In this respect, China has excluded certain US semiconductors from retaliatory tariffs and is considering further exemptions on medical equipment and industrial chemicals.

Consequences

Regarding the internal economic stimulus, China has implemented measures such as interest rate cuts and reduced reserve requirements to inject liquidity into the economy and support growth.

Xi has announced plans to boost unemployment benefits, increase incomes for low- and middle-income groups, and stimulate domestic demand through infrastructure and housing sector reforms.⁴ However, as always, China is considering long-term solutions, including diversification of exports by expanding trade relationships within Asia and other regions to reduce dependence on western markets, thereby mitigating the impact of US and EU tariffs, as well as a continuation of investment initially started with its ‘Made in China 2025’ initiative. Here the aim is to achieve self-sufficiency in key technological sectors.

There is no doubt that, in the short term, tariffs have led to increased costs for Chinese exporters and contributed to economic challenges, including a property crisis and deflationary pressures. Beijing is aware that Trump’s policies have disrupted global supply chains and US manufacturers reliant on Chinese machinery and components are experiencing increased costs and supply-chain challenges, potentially undermining the intended benefits of the tariffs.

In addition, the trade tensions have inevitably contributed to global market instability, with potential risks of a broader economic downturn if the conflict persists. According to a report in The New York Times by its Beijing bureau chief, Keith Bradsher, published last week, shipments of magnets “essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports, while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors.”⁵

On April 4, two days after Trump’s announcement of his “reciprocal tariff” war - since suspended for all countries for 90 days except China, for which, as I have pointed out, tariffs have been raised to 145% - Beijing ordered restrictions on the export of six heavy rare-earth metals refined in China, as well as rare-earth magnets. These are essential components in the production of motors for electric vehicles and various other technologies. China currently dominates global production, accounting for approximately 90% of the 200,000 tonnes produced annually. Japan contributes much of the remaining supply, while a smaller portion - largely reliant on Chinese raw materials - comes from Germany, despite facing tariff-related challenges.

Meanwhile, in eastern China, the Yiwu International Trade Market remains a hub of commercial activity. Often referred to as “the world’s supermarket”, Yiwu has maintained a high level of business despite global trade tensions. Buyers from around the world continue to visit, negotiating prices and placing orders across thousands of stalls. Local businesses in Yiwu have shown resilience amid rising tariffs. “In Yiwu, we are doing global business and our trade will not be affected by merely a few countries or regions,” said Sun Lijuan, a vendor at the market.⁶

A recent survey within the market indicated that among more than 3,000 merchants engaged in US-related trade, only about 100 conduct business directly with American buyers, suggesting a relatively limited direct exposure to US tariffs.

Internal

As the world’s second-largest economy and second-largest consumer-goods market, China is capable of offering buffer zones and strong state backing for export-focused enterprises grappling with tariff challenges.

To help export-oriented firms pivot toward the home market, the ministry of commerce has met with industry associations, major retailers and distributors. These, together with e-commerce platforms, have also made contributions in this regard, establishing channels to put export-blocked inventory on shelves and helping export-focused firms better adapt to the Chinese market. E-commerce giant JD.com, for instance, has set up a procurement fund totalling 200 billion yuan (about $27.7 billion) for the massive purchasing of export-oriented products over the next year.⁷

The Chinese government is telling companies they should see the current situation as an opportunity for technological innovation. Nanjing TICA Climate Solutions Co Ltd, a company specialising in environmental protection, is a prime example of how innovative development can withstand external headwinds. Thanks to continuous investment in research and development, its magnetic suspension products have outperformed competitors, securing 30% of the global market share.

Innovation has become a defining feature within China. From electric vehicles to industrial robots, Chinese products now feature greater technological sophistication. Customs data has captured the country’s transition toward high-end, intelligent and green development. In the first quarter of 2025, the export value of China’s wind turbines, lithium batteries and electric vehicles grew by 43.2%, 18.8% and 8.2% year-on-year, respectively.

One area where there is undoubted progress in development and manufacture is graphics processing units. The Communist Party’s politburo held its April study session on April 25, with an official focus on the development and regulation of artificial intelligence. State broadcaster CCTV emphasised themes of self-reliance and “healthy, orderly growth”, echoing familiar slogans that mask the leadership’s deeper agenda: tightening control over strategic technologies, while insulating the country from external pressure.

The session was led by professor Zheng Nanning of Xi’an Jiaotong University, a regime-friendly academic voice. Notably absent from the official video coverage was He Weidong, a politburo member and vice-chair of the Central Military Commission - fuelling ongoing speculation about internal power struggles and elite purges within what is an opaque political system.

Key points from Xi Jinping’s speech reveal a combination of techno-nationalism, strategic decoupling and authoritarian risk management. He called for breakthroughs in fundamental artificial intelligence technologies - chips, algorithms, and software - underscoring China’s intent to bypass reliance on US firms like Nvidia. While framed as a scientific imperative, this push reflects deeper concerns about technological vulnerability amid escalating geopolitical rivalry. Domestic champions like Huawei stand to benefit from increasing state favouritism and protectionism. However, it is clear that the rules imposed by the Biden administration to restrict the export of advanced graphics processing units to China, far from hindering AI development in that country, actually led to an expansion and production of more advanced processor units within China.

In his speech, Xi promoted rapid AI integration into China’s economy and society, citing the country’s massive data reserves - largely generated without the kind of privacy regulations found in some western countries. The emphasis on upgrading traditional industries also points to China’s desire to boost productivity without loosening state control over the labour force.

The speech included promises of stronger state incentives for AI development, such as intellectual property protections and tax breaks. Xi acknowledged AI’s dangers, but framed them in terms of control, legality and ethical boundaries - coded language often used by the Chinese Communist Party to justify surveillance, censorship and pre-emptive suppression of dissent.

The Chinese president called for international AI collaboration, especially with global south nations, in what appears as a strategic counter to US-led efforts to restrict China’s access to advanced technologies. While couched in the rhetoric of shared development, this outreach likely serves Beijing’s long-term goal of reshaping global tech governance.

Workers’ protests

There are those, such as the Morning Star’s Communist Party of Britain and Socialist Action, who peddle the ‘socialism with Chinese characteristics’ idea. But the working class exercises no control over profits or production, let alone political matters.

As shown by a series of protests by workers in car manufacturer BYD the reality of daily life for ordinary workers is of greatly intensified labour and absolute exploitation - bosses are forcing them to work excessive hours.

BYD is a Chinese car manufacturer primarily known for producing electric vehicles, including plug-in hybrid EVs. The roots of these events can be traced back to December 2023, when BYD acquired Jabil Inc’s mobile electronics division, operating mainly through the Green Point plants in Chengdu and Wuxi, for 15.8 billion yuan. At the time, BYD promised workers that their wages and benefits would stay the same for at least 18 months. US Securities and Exchange Commission documents reviewed by the Hong Kong-based China Labour Bulletin show that Jabil had set aside between $150 and $180 million for employee severance and restructuring payments.

However, within six months of the acquisition, many of BYD’s promises began to fall apart. Workers reported steep wage reductions, erratic schedules and harsher performance standards that did not match earlier agreements. The first large-scale protest erupted on March 28 at BYD’s Wuxi plant. Over a thousand workers, including many mid-level managers, gathered inside, holding banners and demanding that the company uphold its commitments or fairly compensate those wishing to leave. They focused mainly on the slashing of performance-based pay and the removal of birthday benefits. Videos shared online showed police rapidly intervening to break up the protests.

Just a few days later, between March 31 and April 1, the protests extended to BYD’s Chengdu site. Workers there staged similar actions, accusing management of failing to honour promises made during the Jabil takeover. Their demands included job security, clarity around workplace changes and just compensation. In Chengdu, anger was particularly strong over shrinking work hours, forced departmental moves and cuts to allowances and bonuses.

These protests are connected to deeper structural issues. Before the takeover, Green Point workers relied heavily on overtime to earn a liveable wage, often working six days a week and up to 12 hours daily, with monthly earnings of between 5,000 and 6,800 yuan. After BYD implemented a four-shift rotation in 2024, available work hours collapsed, dropping monthly incomes to between 3,000 and 4,000 yuan - barely above Wuxi’s minimum wage of 2,940 yuan. Workers suspect the shift change aimed to drive them to resign voluntarily, saving BYD from paying severance.

CLB’s findings highlight a wider problem across China’s manufacturing industry: an overreliance on overtime to boost low base wages. For example, a forklift operator at BYD earned a base wage of just 2,410 yuan, but relied on more than 3,000 yuan in overtime - working 11‑hour days and exceeding the legal overtime limit by over three times.

Adding to the pressure, BYD reportedly uses the standard five-day, eight-hour work schedule as a punishment for those deemed to be underperforming. Since base wages are low under this system, workers feel under pressure to accept excessive overtime to maintain even a minimal living standard.

CLB emphasises that genuine reform depends on collective bargaining, as mandated under Chinese labour law. Factory-level trade unions are supposed to defend workers’ rights, but have largely failed to do so - especially during the 2024 Wuxi strike. In contrast, CLB points to BYD’s experience in Vietnam, where after a 2022 labour dispute the company agreed to a 15% wage rise, better meals, additional paid breaks and an annual bonus.

The outcome of the March and April 2025 protests remains uncertain. Social media posts indicate that BYD posted a proposed settlement at its Chengdu plant, but banned workers from taking photos of it. Meanwhile, mid-level managers were asked to work overtime during the Qingming Festival (April 4–6) seemingly to appease workers. Yet grievances continue to emerge online, showing persistent worker dissatisfaction.

Revealingly, while Beijing is quite prepared to admit the existence of worker dissatisfaction, what it cannot admit is the existence of class struggle. Since 1978 the concept has been airbrushed out of existence.