China is applying a playbook with defensive and offensive strategies to win President Trump’s trade war
Since the trade conflict began in 2018, China has developed a sophisticated strategy to counter US tariffs and sanctions under the leadership of President Xi Jinping. Now, during US President Donald Trump’s second term, Beijing has doubled down on these strategies, positioning itself to emerge stronger and more self-reliant.
Despite President Trump’s claims of securing trade “wins” for America, China views the situation differently. From its perspective, the trade war has bolstered its resilience, strengthened its technological capabilities, and reinforced its long-term economic strategy.
China’s strategy in the trade war consists of two main components:
1. Defensive measures:
– Diversifying trade flows: China has rerouted exports to other markets to reduce dependency on the US,
– Reducing dollar dependence: Efforts to hedge against the dollar-dominated financial system have accelerated,
– Investing in domestic innovation: China has prioritized indigenous technologies, especially in sectors like artificial intelligence and green energy,
– Boosting domestic consumption: While still a work in progress, this shift aims to support strategic industries rather than entirely replace export-driven growth.
2. Offensive tactics:
– Export controls: China has strategically restricted the export of critical materials like rare-earth minerals, which are essential to U. industries,
– Rapid retaliation: Beijing has responded swiftly to US tariffs, maintaining a firm stance in negotiations and refusing to concede to pressure.
China’s control over rare-earth minerals, vital for industries such as electronics and defense, has proven to be one of its most powerful tools in the trade war. With the US heavily reliant on these resources, President Trump’s tariffs inadvertently exposed vulnerabilities in American supply chains. In early 2025, China tightened export controls on rare-earth minerals, leaving US manufacturers scrambling to secure alternative sources and higher-priced materials.
Domestically, the trade war has provided the Communist Party of China (CPC) with an opportunity to rally the public around themes of self-reliance and resistance to foreign aggression. Anti-American sentiment, already a core part of the CPC’s ideology, has been amplified. Beijing’s narrative portrays the trade war as a continuation of historic foreign humiliations, with President Trump’s policies serving as the latest chapter.
Globally, China’s resilience in the face of US pressure has bolstered its reputation among nations in the Global South. President Xi Jinping’s assertion that the world is undergoing “great changes not seen in a century” resonates with countries skeptical of Western dominance.
While Beijing has no desire for full economic decoupling, it has prepared for the possibility. Chinese firms have adjusted to the reality of limited access to US markets and technology. For instance:
– Huawei: The company has rebounded from stringent U.S. sanctions by focusing on domestic innovation,
– ByteDance: Facing pressure from the Trump administration to sell TikTok to US buyers, the firm has shifted its strategy to align with China’s broader push for self-reliance.
Although tariffs have hurt China’s low-value-added manufacturing sectors, such as textiles and footwear, the CPC has turned these challenges into opportunities. Shrinking exports have forced industrial consolidation, driving out weaker players and improving efficiency. While job losses are inevitable, China’s leadership remains confident, recalling the restructuring of the 1990s that saw millions of layoffs without destabilizing the regime.
The trade war coincides with the implementation of China’s 14th Five-Year Plan, which prioritizes technological development. Policymakers have invested heavily in advanced manufacturing ecosystems powered by artificial intelligence. These efforts aim to prevent a productivity slump and reduce reliance on foreign technology.
While the path is fraught with challenges, Beijing views this as a necessary step toward securing its economic future. Trump’s trade policies, rather than deterring China, have accelerated its push for innovation and self-sufficiency.
President Trump’s tariffs have revealed weaknesses in the US economy, particularly its dependence on Chinese imports for critical inputs. The crackdown on companies like Huawei and ZTE has unintentionally strengthened China’s resolve to develop its own technological capabilities. Rare-earth restrictions, meanwhile, have showcased Beijing’s ability to strike back at US industries.
China has also benefited from Trump’s unpredictability. His tariff policies, while painful in the short term, have allowed Beijing to position itself as a resilient and adaptable player on the global stage.
For the CPC, the trade war is not just an economic conflict—it is a test of China’s long-term strategy. By framing the trade war as part of a broader struggle for global influence, Beijing has reinforced its legitimacy at home and strengthened its partnerships abroad.
However, the trade war has also highlighted the risks of overreliance on any single market. As a result, China has diversified its trade relationships, deepened ties with emerging economies, and accelerated efforts to develop alternative supply chains.
China is unlikely to seek a resolution to the trade war on terms dictated by the US. Instead, it will continue to pursue a hybrid approach of retaliation, adaptation, and innovation. Its investments in technology, strategic use of rare-earth minerals, and focus on self-reliance position it to withstand further pressure from the Trump administration.
While the US remains a formidable global power, China’s ability to navigate the challenges of the trade war suggests it is well-prepared for the future. In Beijing’s eyes, the conflict is not merely about tariffs – it is a battle for economic and strategic dominance in the 21st century. As the trade war continues, the world will watch closely to see how the balance of power evolves.