Trump thought tariffs would bring China to its knees. Instead, Beijing barely flinched. Now, the U.S. is facing a self-inflicted economic crossfire—and investors are watching it unfold in real time. Since taking office, Trump has slapped tariffs as high as 145% on Chinese imports, expecting a quick surrender. But China's economy, while under pressure, hasn't buckled. Exports are still powering nearly 40% of Q1 growth, and deflation hasn't triggered the kind of collapse Washington was betting on. Behind closed doors, Chinese officials are doubling down. A two-day emergency meeting in Beijing concluded that the trade conflict has entered a “high-intensity” phase—with risks now spilling over into finance, technology, and diplomacy.
Meanwhile, diplomacy is nowhere to be found. China's top officials are in Washington this week, yet not a single trade meeting has been scheduled. Beijing wants three things before it talks: less public trash talk from U.S. officials, a proper negotiating counterpart, and a willingness to actually address issues like sanctions and Taiwan. Trump insists discussions are happening—but China's Foreign Ministry has flatly denied it. The bigger issue? The U.S. came unprepared for a long game. “China is determined to take on the U.S. to the end,” said Wu Xinbo, a key advisor to China's Foreign Ministry. “It's not a slogan.”
There are hints of strategic restraint from Beijing—possibly suspending tariffs on U.S. medical gear and chemicals—but it's not a sign of weakness. It's a move to show calm while keeping pressure high. Investors hoping for a swift resolution should take note: Beijing isn't rushing to the table. And Trump, facing inflation risks and political heat, may have fewer cards than he thinks. “Time is on China's side,” Wu added. Markets should prepare for the long haul—because this trade war isn't cooling down anytime soon.
