Is China winning the trade war with the US?

trade war Tensions between China and the US have increased this week and both countries have imposed new port duties on each other’s ships.

The latest escalation in tensions between the world’s two largest economies has thrown bilateral relations and markets into crisis.

After Beijing’s announcement Strict ban on export of rare earths – in retaliation for the US dramatically expanding sanctions Chinese companies – President Donald Trump threatened to impose 100 percent tariffs and new restrictions on “all critical software.”

Trade analysts are skeptical that Mr. Trump’s threatened three-digit tariffs will add to market uncertainty in the near term, especially in sectors with strong supply chain exposure to China, such as manufacturing and technology.

Rare earths, important for use in electric vehicles, aircraft engines, military radar and a range of everyday electronics, are a sticking point in negotiations between the warring countries.

China produces about 70 percent of the world’s rare earth elements and processes about 90 percent.

The Chinese announcement was an apparent surprise to Mr Trump, who described it as an “unexpected” move. But, over the weekend, he seemed more cordial than before, though he still refused to withdraw the tariff threat.

In a post on Truth Social, Mr Trump said: “The United States wants to help China, not hurt it!!!”

China appears unperturbed by Mr Trump’s threats and a surge in its exports suggests Beijing may have the upper hand in the trade war.

“China’s position is consistent. If there is a fight, we will fight to the end; if there is a negotiation, the door is open,” a Chinese commerce ministry spokesman said on Tuesday.

“The United States cannot demand dialogue while imposing new restrictive measures with threats and intimidation. This is not the right way to engage with China.”

Is China winning the trade war?

China appears to be gaining the upper hand in its ongoing trade dispute with the US, nearly six months after Mr Trump imposed massive import tariffs on the Asian economic giant.

Chinese exports rose 8.3 percent in September from a year earlier to nearly £246 billion, while exports to the US fell nearly 27 percent.

After Mr Trump announced his worldwide tariffs in April, many major countries moved to diversify their foreign trade, signaling a global shift towards a system where the US is no longer the central market.

In line with this change, Chinese shipments to non-US destinations increased by 14.8 percent, the fastest since March 2023, according to data from the General Administration of Customs. Exports to the EU increased by 14 percent, to ASEAN countries by 16 percent and to Africa by almost 56 percent.

The minimal impact of the Trump tariffs on its overall trade strengthened China’s resolve to adopt a stronger position in negotiations with Washington, as reflected in tighter restrictions on exports.

Strong demand from markets outside the US suggests Chinese exporters may be less sensitive to additional tariffs threatened by Mr Trump. Sugar imports rose 7.4 percent last month, pointing to a possible improvement in domestic consumption.

A self-driven recovery in China would mark a clear erosion of US dominance in the global economy. But analysts warn it is too early to declare a winner in the trade dispute.

“While China’s recent export growth suggests some resilience, it does not necessarily mean Beijing has gained an advantage in the trade war,” said Lukman Otunuga, a senior market analyst at broker FXTM. Independent,

“Much of that increase may reflect front-loading of shipments ahead of new tariffs or changes in trade routes. The overall picture remains mixed, with both economies facing structural challenges amid prolonged trade tensions.”

Mr Otunuga said additional US tariffs were likely to increase market uncertainty in the near term, and “investors may see higher volatility as markets weigh on corporate earnings and global growth prospects”.

What are the new levies?

Mr Trump last week unveiled new export controls on critical software as well as an additional 100 per cent levy on Chinese imports into the US from November 1. He also threatened to cancel the planned personal meeting with the President Xi JinpingHis first in six years, but the US Treasury Secretary Scott Besant Reuters was later told that the two leaders were scheduled to meet in South Korea in late October.

Bloomberg Economics estimates that a 100 percent tariff increase by the U.S. would increase effective rates on Chinese goods by 140 percent, bringing trade to a halt entirely.

“So far this year, China has shown it does not desire a trade war, but it is willing to retaliate if tensions escalate as needed,” Lin Song, chief Greater China economist at ING Bank NV, told Bloomberg.

“Export flexibilities will reinforce confidence in this approach ahead of talks later this month.”

According to the Peterson Institute for International Economics, the average US tariff on Chinese imports reached 58 percent by the end of September, while Chinese tariffs stood at 33 percent.

Despite current rates already being 25 percentage points above the global average, China’s manufacturing strength is driving export growth.

In a tit-for-tat move, China imposed new port charges on US-owned ships docking in the country, which came into effect from Tuesday.

Beijing announced last week that ships owned or operated by US companies or individuals will have to pay a fee of 400 yuan (£42) per net ton per voyage when they dock in China. The fee will be applied to a single ship for a maximum of five voyages each year, and will be increased each year until 2028, when it will rise to 1,120 yuan (£117) per net tonne.

The charges are largely in line with port fees introduced by the US. Ships owned or operated by Chinese entities will be charged $50 (£37) per net ton for each voyage to the US, increasing by $30 (£22) per net ton each year until 2028.

China’s new port fees could hit oil tankers accounting for 15 percent of global capacity, according to Clarksons Research.

Will Donald Trump meet Xi Jinping to talk trade?

Mr Trump and Mr Xi were expected to meet at the APEC summit in South Korea in late October. There was also talk of the US President visiting Beijing in January, but after the recent increase in tensions, the chances of those meetings seem less.

Mr Besant said the US president was on track to meet the Chinese leader as he sought to reassure traders and investors on both sides of the Pacific, highlighting the cooperation between their negotiating teams and the possibility that they could still find a way forward from the current tariff truce.

“We have de-escalated tensions to a great extent,” Mr. Besant told Fox Business Network on Monday.

He said there were substantial talks between the two sides over the weekend and there will be US-China staff-level meetings on the sidelines of the World Bank and International Monetary Fund annual meetings in Washington this week.

“It is not necessary to have a 100 percent tariff,” Mr. Besant said. “Despite this announcement last week, relations are good. Lines of communication have reopened, so we’ll see where this goes.”

“President Trump said the tariffs will not go into effect until November 1,” he said. “He will meet with Party Chairman Xi in Korea. I believe the meeting will still go on.”

Washington and Beijing have been talking since May.

China’s commerce ministry confirmed on Tuesday that a working-level meeting had taken place the previous day.

It also highlighted formal talks held earlier in London, Stockholm and Madrid, which culminated in a 90-day tariff extension.

However, the ministry warned that “the US cannot ask for talks while threatening new restrictive measures”.