1 China sees early hit from massive US tariffs
PRC raises tariffs
April 11
The Customs Tariff Commission of the State Council announced that the PRC would increase tariffs on U.S. imports to 125 percent. The Commission added that Beijing would “simply ignore” further tariff escalations with the U.S. if Washington “persists with its tariff number games.”
The Commission said, “Even if the US further raises tariffs to even higher levels, it would no longer have any economic significance and would go down as a joke in the history of world economics. However, should the US insist on continuing to substantially harm China’s interests, China will resolutely institute countermeasures and see them through to the end.”
Early fallout of US tariffs on China
April 9
1. Bloomberg News reported that Amazon canceled orders for multiple products made in China and other Asian countries after President Donald Trump’s April 2 tariff announcement. The products include beach chairs, scooters, air conditioners, and other merchandise from multiple Amazon vendors.
April 10
1. In a report, Goldman Sachs lowered its forecast for China’s GDP growth to 4 percent in 2025 and 3.5 percent in 2026, citing the impact of U.S. tariffs on Chinese imports. This was down from 4.5 percent in 2025 and 4.0 percent in 2026 previously.
2. Caixin reported that the Port of Shanghai — which had been bustling with activity just days earlier — had almost no cargo ships heading to the U.S. on the second day after Trump imposed a 145 percent tariff on China. Caixin added that about half of the shipping capacity on the China-U.S. route will be canceled in the near future, and most cargo owners have suspended shipments to wait and see how the situation develops.
Caixin noted that the air freight situation is also grim. A logistics agent in southern China told Caixin on April 9 that the general trade cargo shipped to the U.S. by air could drop by 90 percent in the week of April 14.
3. South China Morning Post reported that some Chinese exporters are abandoning shipments mid-voyage and surrendering containers to shipping companies to avoid the steep U.S. tariffs. Industry insiders describe the move as “preparing for the Long March.”
A staff member at a China-listed export company told SCMP that its U.S.-bound container volume had dropped from 40 to 50 containers a day to just three to six due to the new U.S. tariffs. The staff members added, “We’ve halted all shipping plans from the Philippines, Vietnam, Indonesia, and Malaysia. Every factory order is halted. Anything that hasn’t been loaded will be scrapped, and the cargo already at sea is being re-costed.”
A client had told the company it was ditching goods already on the water and giving them to the shipping company, as “no one will buy them after the tariffs are imposed.”
The staff member said, “The loss on every container we ship is now greater than the profit we used to make from shipping two. Who’s going to keep doing this? We’re mentally preparing for the worst. There won’t be any recovery in the short term – probably not until the middle of next year.”
4. Reuters reported that Chinese sellers on Amazon are planning to increase prices or quit the U.S. market to find new markets as a result of Trump’s tariff hike.
5. Reuters reported that Chinese manufacturers of plastic Christmas trees and other Christmas decorations have not received any orders from U.S. clients that should have come in by mid-April.
Reuters said that U.S. retailers source 87 percent of Christmas decorations — worth about $4 billion — from China. Also, Chinese factories are heavily dependent on the U.S. market, which is where they sell half of what they manufacture.
6. Factory notices announcing “holidays” have been circulating on Chinese social media. Those Chinese companies noted that employees are required to take unpaid leave due to the impact of U.S. tariffs. Some export-oriented firms said that 80 percent of their U.S. orders have been canceled and their production lines have been halted.
Beijing continues with hardline rhetoric in responding to US tariffs
April 9
1. PRC foreign ministry spokeswoman Mao Ning posted on X an archival video of Mao Zedong speaking at the fourth session of the first Chinese People’s Political Consultative Conference National Committee in February 1953 when the U.S. and the PRC were on opposite sides of the Korean War.
Mao Zedong said, “As for how long the war should last, I think we shouldn’t decide that. In the past, it was decided by Truman. In the future, it will be decided by Eisenhower — or whoever the president of the United States may be. In other words, they can fight for as long as they want — until China’s complete victory.”
Mao Ning also wrote in the post, “We are Chinese. We are not afraid of provocations. We don’t back down.”
2. Bloomberg reported that top PRC leaders would meet on April 10 to discuss additional economic stimulus in the wake of increased U.S. tariffs on Chinese products, citing people familiar with the matter.
The people said that the ad-hoc meeting would focus on support measures for housing, consumer spending, and technological innovation. The financial regulators and other government bodies are also meeting to discuss steps to stimulate the economy and stabilize the markets.
April 10
1. South China Morning Post published a letter from Huang Jingrui, a spokesman for the Office of the Commissioner of the PRC Ministry of Foreign Affairs in Hong Kong.
Huang criticized the U.S. tariffs as being “nothing short of naked intimidation and blackmail,” adding that the PRC rejects the move. “Such actions by the U.S. will never ‘make America great again’; instead, they have made America a barbarian of the 21st century,” he added. Huang also wrote, “A tariff-wielding barbarian who attempts to force countries to call and beg for mercy can never expect that call from China.”
Huang noted that while U.S. tariffs would apply to Hong Kong, “the sky will not fall here” because Hong Kong has a “unique advantage of being backed by the motherland and connected with the world.”
2. PRC foreign ministry spokesman Lin Jian said at a regular news conference that the U.S. “uses tariff as a weapon to exert maximum pressure for its own selfish gains, which severely hurts the legitimate rights and interests of all countries, violates the WTO rules, sabotages the rules-based multilateral trading regime, and destabilizes the global economic order. The U.S., in defiance of global criticism, is pitching itself against the rest of the world.”
Lin said that “tariff and trade wars have no winner” and the PRC “does not want to fight these wars but is not scared of them.” He added that if the U.S. is “determined to fight a tariff and trade war, China’s response will continue to the end.”
Economic situation symposium
April 9
PRC premier Li Qiang presided over a symposium on China’s economic situation with experts and entrepreneurs where he heard their views and suggestions on the current state of the Chinese economy and future economic work.
According to state media reports, the economists and business representatives at the symposium noted that China’s economy has, since the beginning of the year, been “generally maintained stable operations and is moving toward positive development” with new growth drivers accelerating and expanding. They added that although changes in the external environment have brought considerable challenges, China’s economy “still holds many advantages, demonstrates strong resilience, has great potential, and has a promising long-term outlook.” The economists and entrepreneurs also offered suggestions on how to respond to external shocks and promote sustained economic improvement.
Li Qiang said that China’s economic situation in 2025 is “relatively unique,” adding that the economy continued its upward trend in the first quarter as the central government responded “calmly and steadily to various risks and challenges” under the strong leadership of Party Central with Comrade Xi Jinping at the core.” Li then acknowledged that external shocks are putting some pressure on China’s stable economic performance, but the central government had “fully anticipated” this and is “well-prepared to deal with various uncertainties.”
Li said, “As long as we remain confident, united, and focused on doing our own work well, we will be able to turn challenges into opportunities and ensure that the Chinese economy remains on a steady and long-term growth path.”
Big picture
As of April 9, the U.S. had imposed 145 percent tariffs on Chinese imports, while the PRC had levied 84 percent tariffs on U.S. imports and other retaliatory measures (see here and here).
President Trump also suspended full reciprocal tariffs (leaving a baseline tariff of 10 percent) on all countries for 90 days to allow for negotiations. Trump said that over 75 countries have reached out to the U.S. asking to negotiate.
Our take
1. The CCP is girding up for a “protracted war” with the U.S. on trade even though early signs are out that China’s export industry has been dealt a severe blow and the Chinese economy lacks sufficient resilience to withstand a prolonged trade “struggle.” There are several reasons for this:
i) Politics is a primary consideration for Beijing. The CCP never publicly admits to its faults or defeats (even if it does, it is to “spin tragedy into victory”) because it has to uphold the “leadership of the Party” and the image of being “great, glorious, and correct” (偉光正) in striving to maintain the stability and legitimacy of the regime. From the CCP’s perspective, a trade conflict with the U.S. is a challenge to its political system and one that it cannot lose. This leaves Beijing no choice but to act tough and be confrontational with the United States.
That said, the CCP has continued to drop hints in its propaganda and responses to U.S. tariffs that it is open to negotiations. It is conceivable that Xi Jinping could speak directly with Trump on the matter if he receives reassurance from the U.S. that such an engagement would lead to a positive outcome for the PRC.
ii) The CCP has to resort to tough and aggressive rhetoric towards the U.S. because it has long fostered hatred towards America and the West to leverage nationalistic sentiments. Therefore, the CCP is blaming the U.S. for the tariffs in its propaganda and is seeking to transform external pressure into a force for rallying public unity.
iii) The CCP has been promoting its brand of “multipolarism” and setting itself up as the champion of the “Global South” in a challenge to the U.S.-led global order. If Beijing were to immediately capitulate to Trump’s tariffs, it would undermine its long-term efforts to advance its domination agenda and displace the U.S. as the global hegemon.
iv) The CCP could believe that China’s economy is resilient enough (even if it means sacrificing the Chinese people’s interests) to absorb the impact of a continually escalating tariff war. Concurrently, the CCP could be hoping that internal political divisions in the U.S. and American businesses affected by the tariffs could force Trump to moderate his tariff policy and his administration’s hardline stance towards China in general. Should the Trump administration make the first compromise while the PRC holds firm, the CCP would gain the strategic upper hand in its “struggle” with the United States.
2. A protracted tariff war between the U.S. and the PRC would hurt both sides, but the latter would likely come out worse in the long run.
Short term impact
United States
- The U.S. is likely to see price hikes in goods of which the bulk has long been sourced from like apparel, electronics, furniture, decorations as alternative imports and production capacities may not be able to meet demand in the near term.
- U.S. industries that rely heavily on China-made components and intermediate goods, such as the auto industry, may face supply chain disruptions and production halts.
- Uncertainties surrounding Trump’s tariff policy, cost factors, and other issues may make other countries adopt a “wait-and-see” approach to investing in manufacturing in the U.S. instead of rushing to “onshore” their production in America per the Trump administration’s wishes.
China
- China’s export sector is likely to be heavily impacted by U.S. tariffs, particularly industries heavily reliant on the U.S. market like electronics, machinery, and apparel (這個要確認). Reduced orders could lead to declining revenues, layoffs, and business closures.
- In the short term, the CCP authorities can deploy fiscal and monetary policy tools — such as interest rate cuts, tax reductions, or subsidies — to support China’s export sector. This would create the impression that the PRC is more “capable” of withstanding U.S. tariff pressure and economic troubles.
Medium term impact
United States
- The U.S. could struggle to find substitutes to Chinese imports and rebuild supply chains.
- Uncertainty surrounding future tariffs could create risks for supply chain reconstruction and investment in the United States.
- The CCP could impose additional retaliatory tariffs and countermeasures, putting pressure on U.S. exports like agriculture.
China
- China’s export-oriented economy will come under even greater strain, with increased risks of business closures and rising unemployment.
- Markets within China and outside the U.S. will struggle to absorb China’s excess production capacity, and “involution” among Chinese companies competing for slim (or negative) profit margins will worsen.
- Prolonged unemployment in China could exacerbate deflationary pressures and increase social instability.
Long term impact
United States
- A stable U.S. tariff regime on Chinese imports would create a predictable profit environment, incentivizing the repatriation of manufacturing to the U.S. or the reconstruction of supply chains outside China, while fostering technological innovation.
- Technological innovation in manufacturing and other sectors could see a boost as the U.S. eases off its reliance on Chinese products.
- The U.S. could establish a new global trade system with other countries excluding China that is more favorable to American geostrategic interests.
China
- China’s manufacturing sector would be weakened by its loss of access to the U.S. market and even other markets as countries impose protectionist measures.
- Chinese companies will struggle with innovation due to U.S. technology restrictions and sanctions, as well as the stifling business environment fostered by the CCP authorities.
- Deflation in China would worsen and become chronic.
2 He Weidong’s absence from key meeting increases probe probability
Rumors and news that Central Military Commission vice chairman He Weidong is under investigation started circulating after the conclusion of the Two Sessions in March 2025. We previously analyzed those rumors and developments (see here, here, here, and here).
Recent developments and news suggest that it is more likely than not that He is in trouble.
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April 8 to April 9
The CCP held a central conference on work related to peripheral affairs in Beijing. Xi Jinping attended the meeting and delivered an important speech. Also in attendance were the six other members of the Politburo Standing Committee (Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang, and Li Xi) and PRC vice president Han Zheng, according to state media.
Footage of the meeting from CCTV’s prime-time program Xinwen Lianbo showed that all members of the Politburo and other national leaders were also in attendance, with the exception of CMC vice chairman He Weidong.
April 10
Financial Times reported that He Weidong was removed from his post in recent weeks, citing five people (including current and former U.S. officials) familiar with the matter.
Three of the five people said He was purged due to alleged corruption. A sixth person said that He was no longer at his post. One of the people said that the authorities were interrogating him.
FT added that PRC defense minister Dong Jun was subjected to an initial investigation but appeared to have been cleared, citing two people familiar with the case.
Our take
1. He Weidong’s absence from the central conference on work related to peripheral affairs is the second public event (the first being a tree-planting event in Beijing) that he has noticeably missed since rumors that he is being investigated started circulating. This development and the recent FT report suggest that there is a high chance that He is currently being subjected to some form of probe. If confirmed, the investigation of He Weidong would mark the first time in 60 years that the CCP has purged the second-highest-ranking active-duty figure in the People’s Liberation Army.
Corruption is pervasive in the CCP. Once the anti-corruption authorities initiate an investigation, they almost always uncover issues with the suspect, be it minor or major. This means that even if He Weidong is not involved in “anti-Xi” activities or other serious offenses, it would be very hard for him to regain the Xi leadership’s trust and be reinstated in a significant role. He’s best-case scenario would be a “soft landing” where he is subjected to lighter Party disciplinary action and sidelined to a “second-line” position or retired on the pretext of health issues. In the worst-case, He could be criminally prosecuted and handed life imprisonment or a suspended death sentence. We believe that He Weidong likely faces more severe charges because the CCP leadership would be loath to investigate a sitting CMC vice chairman without substantial and reliable evidence of wrongdoing, given the political fallout such a high-profile probe would entail.
2. An investigation of He Weidong signals to the military and the civilian officialdom that Xi Jinping is dead serious about his “self-rectification” campaign and desire to root out corruption in the regime. Xi’s resolve means that even officials who are regarded as his loyalist or allies would be shown no leniency if they are found guilty of corruption or disloyal behavior.
He’s probe is likely part of the fallout of the earlier investigation into former CMC Political Work Department head Miao Hua. The consequences of that prove, and the unusual swapping of jobs between Politburo members Li Ganjie and Shi Taifeng, foreshadow sweeping purges in the Party, government, and the military. Mass purges and personnel reshuffles in the PLA will spread unease within the ranks, further alienate commanders and the troops, and lower the military’s operational effectiveness.
