US tariffs are set to increase this week as President Donald Trump’s administration follows through on threats to impose additional 10% duties on Chinese imports. The escalation has prompted immediate reactions from Beijing, with China preparing countermeasures focused on American agricultural exports amid rising China-US trade tensions.
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How China Plans to Combat US Tariffs, Strengthen Factories & Stimulate Growth
China Targets US Agriculture as Primary Retaliation Target
China’s potential countermeasures against US tariffs are being closely examined by markets worldwide right now. According to a report from the Global Times, a state-backed Chinese newspaper, US agricultural and food products will likely be the primary targets of Beijing’s response.
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“China is studying and formulating relevant countermeasures in response to the U.S. threat of imposing an additional 10% tariff on Chinese products under the pretext of fentanyl,” the Global Times reported, citing an anonymous source.
“The countermeasures will likely include both tariffs and a series of non-tariff measures, and U.S. agricultural and food products will most likely be listed.”
Companies have targeted agricultural exports during previous trade disputes, making this strategy expected. Despite a 14% decline in Chinese imports of US agricultural products in 2024, American farmers remain vulnerable to further disruption.
“Despite a decline in imports since 2018, any tariffs on key U.S. agricultural products like soybeans, meat and grains could have a significant impact on U.S.-China trade as well as U.S. exporters and farmers,” said Genevieve Donnellon-May, a researcher at the Oxford Global Society.
Factory Orders Surge Ahead of Tariff Implementation
Chinese factory activity showed unexpected strength in February as importers rushed to place orders before the new tariffs take effect. The official purchasing managers’ index rose to 50.2% from 49% in January, crossing the threshold that separates contraction from expansion.
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New orders experienced particularly strong growth, with that index jumping to 51.1. Companies are attempting to front-run the tariff increases scheduled for Tuesday, which has caused this surge.
“Steady industrial production suggests that government spending and ‘front running’ to beat the higher tariffs supported stronger business activity last month,” Zichun Huang of Capital Economics noted in a recent report.
However, the analyst cautioned that:
“growth still looks at risk of slowing this quarter, at least partially reversing the pick-up in Q4 (October-December). And that’s before the hit from tariffs is felt in earnest.”
Economic Stimulus Plans Unveiled as Trade War Intensifies
As US-China trade tensions escalate, President Xi Jinping’s government is preparing to announce significant economic stimulus measures during the National People’s Congress which begins Wednesday. Most analysts expect Chinese leaders to maintain their growth target of around 5% for 2025.
To achieve this goal amid increasing external pressures, Beijing will push China’s official budget deficit target to its highest level in over three decades. The government will likely introduce trillions of yuan in stimulus spending to combat deflation, a property market crash, and the impacts of renewed trade tensions with the US.
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“The way to deal with tariffs is the same as to deal with other issues in the Chinese economy, that is, to boost domestic consumption,” explained David Li Daokui, an economics professor at Tsinghua University and a regular adviser on policy to Beijing.
Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University, offered a stark assessment: “A China-U.S. trade war is not inevitable, but Trump’s decision to impose tariffs now is a bad decision. Trump and his advisors may think that imposing tariffs at this time is to put pressure on China, sending a signal, but this will backfire and China will inevitably respond strongly.”
The final shape of China’s economic stimulus and countermeasures will become clearer this week as both the new US tariffs take effect and the National People’s Congress convenes, setting the stage for what could be a prolonged period of China-US trade tensions.
