Trump's trade war is a strategic opportunity for China: Communist Party's flagship newspaper

People's Daily says preparations long in place for Trump's aggressive trade measures.

In this briefing:

• The People’s Daily - the flagship newspaper of the ruling Communist Party, said in a key editorial that China is well equipped to withstand the pressures of a Trump-led trade war.

• It pointed to long-standing preparations to deal with Trump’s trade aggression, given the open salvo of trade restrictions against China was fired seven years ago.

• Since then, China has sought to advance the diversification of its export markets to reduce its dependence upon the US, with an especial focus upon ASEAN and Belt and Road nations situated outside of the West.

• Beijing also assembled a plan for large-scale fiscal and monetary stimulus at the end of last year, in anticipation of heavy handed tariffs from Trump at the start of his second term in office.

• The Communist Party claims that the trade war will create strategic opportunities for China that it can readily capitalise upon thanks to the advantages conferred by its system of political economy.

• Chief amongst its strategic goals at present is a structural transformation of the Chinese economy, that will give greater play to domestic consumption and reduce external dependence.

Communist Party puts on a brave face over Trump’s tariffs

Last Wednesday, the Trump administration unveiled an additional 34% tariff on all Chinese imports, as part of a broader raft of aggressive trade measures directed at global trading partners.

Beijing promptly responded on Friday, with the imposition of a tit-for-tit 34% tariff of its own directed at US goods.

In an editorial piece published on Monday, 7 April, the People’s Daily sought to downplay the potential impact of the tariffs on the Chinese economy, while accusing the US of irresponsible trade practices.

The editorial appears to have the primary goal of maintaining confidence and preventing panic in China’s domestic markets - particularly in the face of a rout in Chinese A-shares.

“America’s abusive implementation of tariffs will cause a shock for us, but it doesn’t mean the sky is collapsing,” said the editorial piece entitled “Concentrating Our Energies on Attending to Our Own Affairs Well” (集中精力办好自己的事).

“China is a super-large scale economy, and we possess the strong ability to withstand pressure from the USA’s bullying tariff shocks.

“A drop in US exports will not have a catastrophic impact on our entire economy.”

The People’s Daily also touted China’s lengthy experience in dealing with US trade disputes, following nearly a decade of heightened tensions with Washington since Trump’s first term in office.

“We have already fought eight trade wars with the US, and accumulated rich experience in battle,” it opined.

Its main argument is that China is well-positioned and prepared to deal with a Trump-led trade war, thanks to the diversification of its export markets since the US president’s first term in office, as well as large-scale stimulus plans assembled by Beijing at the end of last year in anticipation of punishing tariffs.

Export diversification

The People’s Daily points out that China has actively sought to diversify its export markets since Trump’s first term as president, to reduce economic dependence upon the US and its allies.

According to its figures, the US share of China’s total exports has fallen by nearly five percentage points over the past six years, from 19.2% in 2018 to 14.7% in 2014.

At the same time, the prominence of other export markets - in particular ASEAN and Belt and Road nations - has surged.

From 2018 to 2024, ASEAN’s share of Chinese exports has risen from 12.8% to 16.4%, while Belt and Road nations have seen their share surged by over nine percentage points, from 38.7% to 47.8%.

China’s export manufacturers could also remain resilient thanks to the domestic market, and heavily touted plans by Beijing to raise internal consumption this year.

The People’s Daily claims that nearly 85% of China’s exporters simultaneously engage in domestic operations, which account for nearly 75% of total sales.

Beijing’s anticipated Trump’s trade war with mass stimulus package

China’s Central Economic Work Conference already unveiled plans for vigorous stimulus measures in December last year, in anticipation of Trump’s aggressive trade measures upon assuming office.

The Two Sessions congressional event held in March lent greater substance to these measures, raising the budget deficit for 2025 to a record-high 4%.

Beijing also plans to engage in the copious issuance of Chinese treasuries to raise funds for the “Two New” (两新) and the “Two Heavy” (两重) stimulus packages, that seek to boost consumption and investment spending.

Domestic analysts say this additional debt raising could increase China’s broad deficit ratio to around 10% in 2025.

“The Party Central Committee already anticipated the new round of economic and trade pressure the US has applied to us, and fully analysed the potential impacts,” the People’s Daily said.

“The completeness and timeliness of response measures is amply sufficient.”

On top of mass fiscal stimulus, the Communist Party has stressed the role of coordinated loosening of monetary policy in helping to ride out the short-term headwinds of Sino-US trade war.

The Chinese central bank has signalled that it will reduce both the required reserve ratio and its policy rates this year, to complement the sharp boost in deficit spending.

The People’s Daily further highlighted the use of vigorous policy measures to “firmly stabilise capital markets and market confidence,” alongside guidance to assist Chinese enterprises in “expanding domestic markets and non-US markets, while maintaining their trade with the US to the greatest extent possible.”

Trump’s trade war creates strategic opportunities for China