China’s trade gambit: Beijing plays hardball in Trump tariff talks to try to save its economy

China enters high-stakes trade talks with the U.S. with a laser focus on reducing President Trump’s tariffs and semiconductor restrictions to protect its economy, which is hobbled by an aging population, a weak housing sector and other domestic problems.

Given the pressure on Beijing, Trump administration officials say they have the upper hand in negotiations. Still, China’s intent on playing hardball is a shift from its more collaborative approach during Mr. Trump’s first term, which resulted in a “phase-one” trade deal.

“The Chinese economy continues to experience serious challenges, including a weak property sector, growing debt in local governments, and high youth unemployment. U.S. tariff hikes are also taking a toll on Chinese exporters, particularly those focused on making products destined for the U.S. market,” said Wendy Cutler, a vice president at the Asia Society Policy Institute, a think tank in Washington.

“China is looking to achieve a deal which would spare it from U.S. tariff increases,” she said, but “Beijing has its limits in terms of what it would pay to receive such assurances.”

Unlike other countries that came to the negotiating table, China retaliated against Mr. Trump’s “Liberation Day” tariffs by imposing hefty levies on U.S. goods, an early sign that Chinese President Xi Jinping had no plans to cater to Mr. Trump’s will. After all, the U.S. has its own pressures, particularly from price-sensitive consumers who will chafe at higher, tariff-driven costs in the checkout aisle.

Tit-for-tat tariffs exceeded 100%, prompting de-escalation talks in Geneva that reduced U.S. tariffs on Chinese imports to 30% and Chinese tariffs on U.S. goods to 10%.

Reaching a deeper understanding of trade is proving difficult. On Wednesday, Mr. Trump acknowledged in a Truth Social post that Mr. Xi was a tough cookie.

“I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” he wrote.

Beijing says the U.S. undermined the Geneva truce by issuing warnings about Huawei chips for artificial intelligence and revoking student visas for Chinese students.

“China urges the U.S. to correct its wrong practices such as introducing export controls on chips to China, suspending the sale of chip design software to China, and announcing the revocation of visas for Chinese students studying in [the U.S.], and to safeguard the consensus reached by both sides with concrete actions,” Chinese Embassy spokesman Liu Pengyu told The Washington Times.

Mr. Trump felt China violated the agreement by tightly regulating the export of rare earth minerals used in military equipment and other technologies.

The logjam is increasing pressure on Mr. Trump and Mr. Xi to get on the phone and hash out a deal themselves.

Even if that happens, resolving differences between the world’s largest economies won’t be easy. Beyond reducing tariffs, China will want the U.S. to relax export controls that restrict China’s access to advanced semiconductors and chip manufacturing equipment.

For years, U.S. leaders have complained that Beijing engages in unfair trade practices beyond tariffs, such as stealing intellectual property and subsidizing industries that export a flood of cheap products, undercutting producers in other countries.

“Problems are arising because the recent detente pushed off exceptionally hard issues; it did not resolve them,” said Wayne Winegarden, a senior fellow in economics at the Pacific Research Institute. “So where Trump sees preventing technology flows to China as a national security necessity, China sees an aggressive policy trying to thwart their interests.”

Mr. Winegarden said China’s restrictions on rare earth sales to the U.S., which the Trump administration views as problematic, are the flip side of the coin. China views these sales as leverage in the talks.

“China is much more prepared this time around,” Ms. Cutler said.

She said China is using tariff and nontariff measures to respond to U.S. levies and is less dependent on the U.S. market than during Trump’s first term.

Vice Premier He Lifeng is leading talks for the Chinese side. He is viewed as a no-nonsense negotiator who is closely aligned with Mr. Xi and someone who will take a tougher stance than predecessors who negotiated the deal in Mr. Trump’s first term.

“In any deal with the U.S., Beijing is likely to be much more insistent on the need for Washington to respond to its negotiating requests as well, avoiding the one-sided nature of the phase-one trade agreement,” Ms. Cutler said.

Mr. Liu said the Chinese position on trade talks has “always been clear,” namely that trade between the U.S. and China is of “great significance” for the two countries and for “the stability and development of the global economy.”

“We firmly oppose the unilateral imposition of tariffs by the U.S. side and will continue to take necessary measures to resolutely safeguard our legitimate rights and interests,” he said.

Mr. Trump has shown no sign of reducing tariffs on his own. He said the tariffs have been effective in bringing the Chinese side to the table. Chinese factory output decreased in May at its fastest pace since September 2022, according to the Caixin/S&P Global manufacturing index.

“We’re not looking to hurt China. China was being hurt very badly. They were closing up factories, they were having a lot of unrest, and they were very happy to be able to do something with us,” Mr. Trump said after the Geneva truce in mid-May.

Treasury Secretary Scott Bessent said trade talks allow China to pivot toward domestic demand instead of flooding the world with cheap goods.

“Everyone knows it needs to change, and we want to help it change,” Mr. Bessent said in an April speech to the Institute of International Finance. “China can start by moving away from export overcapacity and supporting its own consumers and domestic demand.”

The Chinese Embassy insisted that domestic demand is a “driving force” behind its economic development and that its contribution to growth is increasing.

“Making efforts to expand domestic demand is an important task for China’s economic work at present and in the coming period,” Mr. Liu said. “Meanwhile, thanks to a complete industrial chain and strong manufacturing capabilities, Chinese products still have a strong competitive edge in the world market.”

Mr. Trump is troubled by that competitive edge. He cites large U.S. trade deficits with countries selling plenty of products to American consumers but not buying nearly as much from U.S. producers.

The trade deficit with China was $295.4 billion in 2024, a 5.8% increase from 2023, as imports from the Asian superpower far exceeded what the U.S. exported to China. Mr. Trump has issued social media posts saying “closed markets don’t work anymore” and that China should accept more farm products and other goods.

“It is unclear that the countries will be able to agree on a sustainable and mutually beneficial position that both countries accept as being in their own self-interest,” Mr. Winegarden said. “This means that a major trade dispute will be hanging over the global economy for the foreseeable future.”