| Hi, this is Philip Glamann in Beijing, where Chinese officials — like their counterparts around the world — are digesting the Trump administration’s latest tariff blitz. Before we get into it, here’s some key stories to get to grips with what happened: The levies certainly present China’s economic policymakers with serious challenges as they try to pull off an economic recovery and reach a growth target this year of around 5%. Frustrated with President Donald Trump, Beijing blasted the US levies and pledged to hit back, though when and to what degree is anyone’s guess. Just how bad are Trump’s so-called Liberation Day tariffs for China? Economist Chang Shu and her colleagues at Bloomberg Economics said the situation “looks close to — or worse — than our worst-case scenario and stands to crush exports.” All told they estimate the average surcharge on Chinese goods rises to a whopping 66.8%. The new tariffs could whack China’s economy even harder than the trade war did during Trump’s first term. Citigroup estimates they could shave 2.4 percentage points off growth this year, while other economists predict a 1 to 2 point impact. In a word, grim. Still, China got through the first trade war with Trump without the sky falling and, if a few things go its way this time, there’s some reason to believe it will handle the newest difficulties fairly well. First, China has kept its powder dry, to use a technical term. It has refrained from rolling out big stimulus to help an economy wobbled by the pandemic. It could juice the financial system by cutting the amount of money banks must hold in reserve, maybe as soon as this month, and free up funds in other ways. Serena Zhou, senior China economist at Mizuho Securities Asia, said “it would be easy for China to roll out another 1 to 2 trillion yuan special of sovereign bonds, if necessary.” That works out to upward of $274 billion — so a whole lot of powder. Then there’s the fact that Trump is hitting everyone else around the world with tariffs. That broad attack wasn’t entirely anticipated when he pledged on the campaign trail to slap 60% levies on Chinese products, leading to dire predictions that the nation’s growth would be halved. Yet Trump is not singling out China this time — at least not yet — something that was a salient feature of his first administration. With everyone else’s goods getting tariffed, well, China’s products may not look so terribly expensive to Americans after all. Additionally, Chinese leader Xi Jinping and his underlings have every reason to believe that their bet on technological advances backstopping future prosperity is paying off. BYD is now the global leader in EVs, and DeepSeek has shown China can compete with the US in AI. China is a few years behind industry leaders in making the most advanced chips but Huawei and SMIC are bound and determined to catch up. In fact, despite US sanctions, they’ve made some breakthroughs that have impressed many observers. At this point, anyone who is surprised by the next big tech advance out of the Asian nation just isn’t paying attention. Finally, Beijing might actually turn Trump’s tariffs into a diplomatic win. Last week, Xi portrayed his country as a stalwart defender of globalization and a responsible player on the world stage, not one bent on protectionism. His audience seemed pleased to hear it, and Chinese diplomats will likely run with the line for a while. The approach gives Xi an opening to fix things with Europe, which to be sure is still miffed about Beijing’s support for Moscow since the full-scale invasion of Ukraine in 2022. China’s top diplomat, Wang Yi, was in Russia this week, a clear sign Beijing wanted to tend to a very important relationship that in recent years has provided his nation with not only a strong economic partner but a steady supply of energy. And expect Beijing to bolster ties with the expanding BRICS bloc and the developing nations it has cultivated for decades, though they have their own worries about China’s exports swamping local manufacturers. Read how the US tariffs are a problem for impoverished countries here. This is not to say Beijing is free and clear. Far from it. Trump’s tariffs could cause recessions in several nations, maybe even in the US, which would hurt the Chinese export juggernaut. Pulling off the consumption pivot will be tricky without building a better social safety net so China’s people don’t feel compelled to save so much of their earnings for health care and retirement. China’s property sector remains in trouble, which affects many households because their home accounts for most of their wealth. The economy is still dealing with deflationary pressure and cautious consumer spending. The job market is weak. There’s still a chance that talks with the US can lead to an agreement lifting levies but don’t hold your breath for a “grand bargain.” There’s very little sign that the US and China are close to holding high-level discussions, let alone a Xi-Trump meeting. Illustrating how far apart the two sides are, this week Wang urged the US to lift tariffs before any talks on fentanyl flows into America. If there is any doubt that Beijing isn’t inclined to back down to Washington on pretty much anything, China took its military pressure on Taiwan to new heights in recent days. In the coming days, we’ll see how China reacts to “Liberation Day.” Xi has been urging officials to play it cool since Trump returned to office and they’re following his lead. But the latest tariffs certainly test that patience. How Beijing responds to a potential TikTok sale to a US buyer and a review of the phase-one trade deal will be telling. If they keep calm and carry on, it’s a strong sign they’re confident they can navigate this latest crisis. What We’re Reading, Listening to and Watching: | 
