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Mention Donald Trump at China’s wholesale markets or trade fairs, and you’re likely to encounter a quiet laugh.
Despite sweeping US tariffs of 145%, Chinese traders largely remain undaunted by the prospect of economic pressure from Washington.
Instead, a wave of online Chinese nationalists have responded with a torrent of satirical memes—circulated via viral videos and reels—often featuring AI versions of President Trump, Vice-President JD Vance, and technology entrepreneur Elon Musk laboring on assembly lines, producing shoes and iPhones.
There is little sign that China is acting like a country bracing for economic hardship; President Xi Jinping has reiterated that Beijing will not yield to outside pressure.
“For more than 70 years, China has achieved its development through self-reliance and hard work… it has never depended on others’ generosity and stands unafraid of unjust suppression,” Xi said this month.
Xi’s confidence is underpinned by China’s reduced reliance on US exports compared to a decade ago. Nevertheless, the increased tariffs and brinkmanship from the Trump administration are highlighting economic vulnerabilities already present within China’s economy. The country is grappling with a property crisis, mounting job insecurity, and an aging demographic—all factors dampening consumer spending.
Since coming to power in 2012, Xi articulated a vision for a rejuvenated nation. That ambition is now being rigorously tested—not just by US trade actions, but by domestic structural challenges. As Trump’s tariffs take effect, the central question remains: will these measures further dim Xi’s economic vision, or can China transform these headwinds into opportunity?
China’s 1.4 billion-strong population should, in principle, provide a vast domestic market. However, pervasive caution persists: economic uncertainty has made many hesitant to spend.
This hesitancy stems less from the trade dispute and more from the collapse in the real estate market. Over the past five years, many have watched the value of their major asset — their homes — fall sharply.
Developers continued aggressive construction even as the property sector faltered. So great was the surge that, reportedly, all of China’s citizens would not fill the nation’s surplus of empty apartments.
He Keng, former deputy head of China’s statistics bureau, observed two years ago that the most “extreme estimate” puts vacant housing at enough for 3 billion people.
Across China, deserted complexes—vast skeletons of concrete high-rises—dot the landscape, earning the moniker “ghost cities”. Even in finished developments with tended gardens and curtained windows, darkness at night reveals the empty homes. Oversupply far exceeds demand.
Government intervention in restricting developers’ borrowing five years ago proved insufficient. House prices have declined, undermining Chinese consumer confidence. Analysts predict home values will fall by 2.5% this year, according to a February Reuters poll.
And real estate isn’t the sole concern for China’s middle class.
There are anxieties over provision of public pensions: in the next decade, around 300 million Chinese aged 50 to 60 are due to retire. A 2019 projection from the Chinese Academy of Social Sciences suggested the national pension fund could be depleted by 2035.
Concerns over employment for younger generations also loom large, as millions struggle to secure jobs. Official data released in August 2023 put the unemployment rate among urban Chinese aged 16 to 24 above 20%; no further figures have been published since.
Shifting from an export-driven model to domestic consumption is not a switch China can simply flip overnight.
“With downward economic pressure, significant short-term growth in domestic demand remains unlikely,” remarks Prof Nie Huihua of Renmin University.
“Transitioning from exports to internal consumption will require time.”
Fudan University’s Prof Zhao Minghao, deputy director of the Center for American Studies, notes: “China has modest hopes for negotiations with the Trump administration… The focus is on reforming domestic policy, such as spurring internal demand.”
To reinvigorate activity, authorities have unveiled billions in childcare grants, wage increases, and enhanced paid leave, as well as a $41bn package promoting discounts for consumer electronics and electric vehicles. Prof Zhang Jun, dean of economics at Fudan University, cautions the sustainability of these measures.
“We require a lasting solution,” he opines. “Residents’ disposable income must rise.”
Xi faces a pressing challenge: the aspiration for shared prosperity outlined at the start of his tenure has not fully materialised.
He is acutely aware of the increasing disenchantment among China’s youth regarding their future—a volatility that could pose deeper risks for Communist Party stability in the form of protests or unrest.
According to Freedom House’s China Dissent Monitor, financial dissatisfaction has fuelled a significant uptick in demonstrations in recent months.
Yet, most protests are swiftly managed and censored online, limiting their immediate challenge to Xi’s leadership.
“Only when the nation thrives do its people prosper,” Xi said in 2012.
That assertion was voiced during a period of rapid economic ascent for China; now, the country’s future feels less assured.
Yet, in sectors like electronics, batteries, electric vehicles, and artificial intelligence, China has made significant advances, redirecting priorities toward high-value manufacturing.
Beijing now competes fiercely with US firms, as seen with the rise of its DeepSeek chatbot and with BYD surpassing Tesla to become the world’s top EV producer last year.
However, Trump’s latest tariff measures could disrupt these achievements.
Targeted restrictions on critical semiconductors—including the latest US limits on exports from Nvidia—underline American efforts to blunt Xi’s ambitions in technology leadership.
Nevertheless, Xi is aware Chinese manufacturers retain a substantial advantage: few places can match China’s industrial scalability and skilled workforce, putting US companies at a disadvantage in relocating production.
Amid these changes, Xi frames the current challenge as an impetus for further reform and diversification in global markets.
“Some exporters will encounter marked impact in the short run,” Prof Zhang acknowledges. “But businesses are already adapting and seeking out new markets. Exporters remain resilient.”
Trump’s previous term prompted China to intensify outreach in Southeast Asia, Latin America, and Africa, leveraging the Belt and Road initiative to deepen ties with the Global South.
Today, China’s diversification pays off: over 145 nations conduct more trade with Beijing than with Washington, according to data from the Lowy Institute.
Back in 2001, just 30 countries prioritized trade with China over the US.
With the US administration targeting allies and adversaries alike, some observers argue Xi could leverage this moment to position China as a dependable and alternative global trading leader.
Xi’s first overseas trip after the latest tariff announcements took him to Southeast Asia—a nod to concerns among regional partners over US trade action.
Now, roughly a quarter of China’s exports are produced in or routed through other countries in the region, such as Vietnam and Cambodia.
Recent US measures may also offer Xi a chance to set a new global diplomatic tone for China.
“Trump’s coercive tariff strategy is a window for Chinese diplomacy,” says Prof Zhang.
However, caution is warranted. Some nations fear that goods meant for the US could flood their markets instead.
After Trump’s 2016 tariffs, an influx of Chinese products found their way to Southeast Asia, hurting local industries.
Prof Huihua warns, “Roughly 20% of China’s exports go to the US. Should they shift to regional markets, it could result in dumping and trigger trade tensions.”
There are limits to Xi’s ability to champion open trade worldwide.
In recent years, China has itself imposed trade restrictions on others.
In 2020, following Australia’s call for an independent COVID-19 inquiry, China responded with tariffs and bans impacting the country’s wine, barley, beef, timber, coal, cotton, and lobster exports, causing some sales to China to fall to virtually nothing.
Australia’s Defence Minister Richard Marles stated earlier this month that his country would not act as a broker for China amid rising US-China trade tensions.
Previous actions could complicate Xi’s global ambitions, with many countries reluctant to pick sides between Beijing and Washington.
For all the challenges ahead, Xi is wagering that Beijing can outlast Washington when it comes to bearing economic pressure in the contest for global influence.
There are early indications that the US is recalibrating; last week, President Trump suggested tariffs on Chinese imports could “come down substantially, but it won’t be zero.”
Meanwhile, Chinese social media quickly reacted.
“Trump has caved,” became a trending topic on Weibo after the US president signaled a less aggressive approach to tariffs.
Regardless of future negotiations, China is clearly taking the long view.
Past trade conflicts have already led China to diversify beyond US markets, particularly toward the Global South.
Today’s disputes prompt China to confront its internal challenges—and fixing them will require solutions devised in Beijing, not Washington.
Top picture credit: Getty Images
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