Beyond 100% Tariffs: Sourcing Strategies as US–China Trade War Escalates

The US-China trade war has entered a new, more intense phase, creating significant challenges and demanding agile strategies for B2B sourcing professionals. The stakes have been raised considerably with the White House confirming that the total tariffs on Chinese goods will reach 104%. Some products like cars, semiconductors, steel and aluminium will face lower taxes. This development, as reported by the BBC today, underscores the urgency for businesses to understand the latest developments and potential impacts to develop resilient and effective sourcing strategies. This article provides an overview of the current situation, potential Chinese responses, and actionable insights to help businesses navigate this complex landscape, drawing on perspectives from various experts and sources.

Current State of the Trade War

The trade relationship between the United States and China is now characterized by confirmed, escalating tariffs and retaliatory measures. The BBC reports, "The White House has published a document confirming that China's 34% tariff rate - set to come into effect in a few hours - will be increased to 84%... Chinese exports to the US had already been subjected to 20% tariffs. This means that the total tariffs on Chinese goods will reach a whopping 104%."

Potential Chinese Countermeasures

In response to these confirmed, escalating US tariffs, China is contemplating a series of countermeasures aimed at safeguarding its economic
interests. Journalist Fred Gao, drawing on insights from prominent Chinese internet opinion leader Liu Hong, outlines six potential responses. These are echoed and expanded upon by Chairman Rabbit (the online pseudonym of Ren Yi), who emphasizes the strategic nature of these actions.

1. Increased Tariffs on US Agricultural Products: "According to sources, in view of recent US bullying behavior, China is considering significantly increasing tariffs on US soybeans, sorghum, and other agricultural products," writes Gao. Chairman Rabbit adds that agricultural products are "a major category in American exports to China" and that "restricting the export of American agricultural products to China through tariffs and other means has always been a core method of China's countermeasures." This is seen as a direct attack on "red states" that support the Republican party.
2. Ban on US Poultry Imports: "Sources indicate that given the frequent outbreaks of avian influenza in the United States, relevant authorities strongly recommend that China prohibit the import of US poultry to ensure the food safety of the Chinese people," per Gao.
3. Suspension of Fentanyl Cooperation: "It has been revealed that due to the US threatening to impose an additional 50% tariff again, the Chinese government is considering stopping fentanyl cooperation with the US," Gao reports. Chairman Rabbit argues that "the fentanyl issue is essentially a domestic problem in the United States" and that China has been unfairly blamed despite its efforts to cooperate. He states that "the Chinese side can suspend [cooperation]."
4. Restrictions on Service Trade: "Sources also revealed that this includes restricting US companies from participating in procurement and limiting business cooperation such as legal consulting services," says Gao. Chairman Rabbit says that the US has a trade surplus with China in services and that China could "take corresponding measures” in the field of service trade, such as “restricting American companies from participating in Chinese government procurement or restricting Chinese companies from cooperating with American legal consulting firms.”
5. Ban on American Film Imports: "Relevant departments are studying reducing or even prohibiting the import of American films," according  to Gao.
6. Investigations into US Intellectual Property Benefits: "According to sources, given the enormous monopolistic benefits that relevant US companies have obtained in China, relevant departments are studying conducting investigations into the above situation," Gao reports.

During the official press conference on April 8, 2025, PRC Foreign Ministry Spokesperson Lin Jian largely avoided directly addressing questions about the impact of tariffs and potential countermeasures, focusing instead on general principles and criticisms of the US's trade policies.

• General Denouncements: When asked about Trump's tariff threats, Lin Jian condemned the US's actions as "abuse of tariffs," "unilateralism, protectionism and economic bullying," and violations of WTO rules.
• Emphasis on Principles: He stressed that "trade and tariff wars have no winners" and that "protectionism leads nowhere."
• Retaliation: While stating that China would take "necessary measures to firmly safeguard its legitimate and lawful rights and interests," he provided no specific details about what those measures might be.
• Non-Confirmation of Specific Measures: When asked about reports of specific countermeasures being considered (levies on farm goods, ban on Hollywood movies), Lin Jian refused to comment on "what's been said on the Internet" and reiterated China's general position.
• Shifting Focus: When pressed about ongoing trade negotiations, Lin Jian deflected by saying that the US "doesn't seem to be serious about having talks right now" and that the US should show "equality, respect and mutual benefit" if it truly wants to talk.

The Question of Who Will Back Down

The central question remains: who will ultimately concede in this trade war? Ryan Hass of the Brookings Institution suggests that "Anyone expecting President Xi to come calling and seek a call with President Trump following April 2 tariff announcement is being dangerously naive" However, writing in Newsweek, analyst Gordon Chang counters that "anyone advising Xi to not beg Trump for forgiveness is also committing malpractice. China is in a precarious position now and desperately needs the American market. Worse for Xi, Trump holds all the high cards"

China's Economic Vulnerabilities

China's economic model, heavily reliant on exports and suppressing domestic consumption, makes it vulnerable in a trade war. In Newsweek, Chang notes that "China is the trade-surplus economy. America's merchandise trade deficit with China hit $295.4 billion last year. That deficit is 5.8 percent greater than 2023's." US Treasury Secretary Scott Bessent has said of China, "They've just got such a big deficit with us that they need our markets. They can't survive without them.”

Reporting for BBC News, Annabelle Liang said that “Beijing has shown no signs of backing down, as it pledges to place its own taxes on American imports. But some analysts say the tariffs will hit China hard, forcing it to restructure its economy and rely heavily on domestic consumption.”

In reality, any tariff upwards of 35% will wipe out all the profits that Chinese businesses make when exporting to the US or South East Asia, said Dan Wang from the Eurasia Group consultancy.

"Any tariff above that is only symbolic," she told the BBC, citing industry figures. She also warned that China is likely to miss its annual growth target of around 5% if its economy is closed off to trade. "Growth is going to be much lower since exports contributed to 20% to 50% of growth since the Covid pandemic."

Tim Waterer from brokerage KCM Trade said import taxes of 104% will not be "sustainable [for China], given the export dynamics of the Chinese economy."

"In the short term they can handle it, but to weather these tariff levels over the longer term would require China to make structural changes such as rebalancing their economy," he added.

Impact on the Global Economy

The potential for an all-out trade war between the US and China carries significant implications for the global economy. Ben Chu of BBC Verify emphasizes the interconnectedness of these two economic powerhouses: "The US and China together account for such a large share of the global
economy, around 43% this year according to the International Monetary Fund. If they were to engage in an all-out trade war that slowed their growth down, or even pushed them into recession, that would likely harm other countries' economies in the form of slower global growth.”

Geopolitics expert Yanmei Xie offers a counterpoint to the notion that US tariffs inadvertently benefit China. Xie points out that China cannot simply absorb the demand lost from the US market and faces the risk of becoming a dumping ground for excess goods. "China cannot replace what the
US is taking away—demand for goods. To the contrary, it will exacerbate excess supply," she explains in an April 8 post on LinkedIn. "If a country
responds to US tariffs by deepening trade with China, it will face both shrinking demand from the US and swelling supply from China. Few countries will opt into that willingly."

Xie outlines five key challenges for China:

"1. Tariffs on Chinese goods reduce direct export to the US.

2. Broad-based tariffs make it harder to reroute exports through third countries, as China did in response to bilateral tariffs during the 1st Trump administration.

3. Third countries may raise their own barriers to avoid becoming dumping grounds for Chinese exports displaced from the U.S.

4. As third countries sell less to the US, they have less money to buy Chinese goods.

5. A tariff-driven drag on global growth will further erode demand for Chinese exports."

Tariffs' Impact on China

The recent escalation in tariffs between the United States and China has profound implications for the Chinese economy and the daily lives
of its citizens. With the US increasing tariffs on Chinese exports to a staggering 104%, the consequences are expected to ripple across trade,
manufacturing, and consumer behavior.

Experts predict a significant slowdown in China’s economic growth as a direct result of these tariffs. Larry Hu, chief China economist at Macquarie, estimates that GDP growth could drop by 2 to 2.5 percentage points, with exports declining by 15% or more. Similarly, the OECD forecasts that
tariffs will contribute to a slowdown in China's GDP growth to 4.4% by 2026.
Kaiyuan Securities projects a 30% reduction in Chinese exports to the US, which would also drag economic growth by another 1.3 percentage points. These predictions were made before the announcement of the new 104% tariff, and therefore represent a best-case scenario for the PRC.

The tariffs are expected to hit the manufacturing sector particularly hard. Small and medium-sized businesses that rely heavily on US markets will face rising costs and reduced competitiveness. According to J.P. Morgan Research, manufacturing output could decline sharply, further exacerbating job losses across export-dependent industries.

For the average Chinese citizen, the tariffs could lead to higher prices for imported goods, job losses in affected industries, and reduced household income. The manufacturing sector, a key employer in China, will bear the brunt of the economic slowdown, leading to widespread economic uncertainty.

Mark Zandi, chief economist at Moody’s Analytics, warns that retaliatory measures could compound global economic instability, which would further strain Chinese households. Meanwhile, Ben Bland from Chatham House highlights the broader geopolitical implications, noting that the tariffs could push Southeast Asian economies closer to China as they seek alternatives to disrupted US trade relationships.

Broader Implications

While some experts, such as William Hurst from the University of Cambridge, argue that the tariffs will cause harm but will not fundamentally destabilize the Chinese economy, others predict lasting consequences. Xu Tianchen of the Economist Intelligence Unit suggests that the escalating trade war could shift from an economic conflict to a battle of political will. In conclusion, the tariffs are expected to have a significant negative impact on China’s economy, reducing exports, slowing GDP growth, and creating uncertainty for citizens and businesses alike. The Chinese government’s response, along with the global economic environment, will determine how deeply these effects are felt in the long term.

Actionable Insights for B2B Sourcing Professionals

Given the now-confirmed over-100% tariffs and the potential disruptions caused by the US-China trade war, B2B sourcing professionals must
proactively adapt their strategies. Key actions include:

1. Diversify Your Supply Base

One of the most critical steps to mitigate risk is reducing reliance on a single supplier or country. Overdependence on suppliers in the US or China exposes businesses to heightened vulnerability during geopolitical conflicts or trade disputes. Here's how to diversify effectively:

• Explore Alternative Regions: Look into sourcing opportunities in Southeast Asia, South America, Eastern Europe, and Africa. Countries like Vietnam, India, and Mexico have emerged as competitive manufacturing hubs.
• Build a Dual-Sourcing Strategy: Identify multiple suppliers for critical components to ensure continuity in case of disruptions.
• Invest in Supplier Qualification: Vet and onboard new suppliers with rigorous quality, compliance, and performance checks to ensure they meet your standards.

Diversification not only mitigates risk but also provides leverage in negotiations with existing suppliers.

2. Assess Tariff Risks

With tariffs now exceeding 100% in some cases, the financial impact on critical products can be severe. Conducting a comprehensive tariff impact analysis is essential:

• Evaluate Affected Products: Identify which products or raw materials in your supply chain are subject to high tariffs.
• Explore Alternative Materials or Suppliers: Consider switching to tariff-exempt materials or partnering with suppliers from countries not subject to punitive tariffs.
• Leverage Trade Agreements: Investigate free trade agreements (FTAs) and preferential tariff rates that could help reduce costs.

By proactively assessing tariff risks, you can make informed decisions to minimize operational disruptions.

3. Strengthen Supplier Relationships

Strong, collaborative supplier relationships can be a lifeline during times of economic uncertainty. Suppliers facing their own challenges, such as increased costs or logistical hurdles, may be more willing to work with you on creative solutions:

• Open Communication: Regularly engage with suppliers to understand their pain points and jointly explore ways to reduce costs, such as redesigning products to use less expensive materials.
• Cost-Sharing Arrangements: Negotiate agreements where both parties share the burden of tariff increases or other economic pressures.
• Supplier Development Programs: Invest in your suppliers by offering training, technology support, or assistance with compliance to enhance their capabilities and long-term partnership potential.

Collaborative relationships foster trust and create opportunities for mutual growth, even in challenging times.

4. Monitor the Political Landscape

The US-China trade war is a fluid situation, with changes occurring rapidly as new policies and tariffs are introduced. Staying informed is vital for making timely adjustments to your sourcing strategies:

• Leverage Reliable Sources: Regularly consult government trade websites, industry publications, and think tanks for updates on trade agreements and tariff changes.
• Scenario Planning: Prepare for potential outcomes, such as further tariff hikes or easing of trade restrictions, by developing contingency plans for various scenarios.
• Engage Trade Experts: Collaborate with trade consultants, legal advisors, or customs brokers to stay ahead of regulatory changes and compliance requirements.

Proactively monitoring the political landscape allows sourcing professionals to anticipate disruptions and adjust accordingly.

5. Consider Nearshoring or Reshoring

Nearshoring or reshoring production is an increasingly viable solution for companies looking to reduce dependence on international trade. While this approach may come with initial costs, it offers long-term benefits:

• Reduced Tariff Exposure: Sourcing or manufacturing closer to your end markets eliminates the risk of high import tariffs.
• Shorter Supply Chains: Nearshoring minimizes transportation costs and lead times, improving responsiveness to market demand.
• Government Incentives: Many countries, including the US, offer tax breaks or subsidies for reshoring initiatives. Investigate these opportunities to offset relocation costs.

By evaluating the feasibility of nearshoring or reshoring, you can create a more resilient and cost-effective supply chain.

6. Negotiate Favorable Payment Terms

Mitigating financial risks is just as critical as addressing operational challenges. In times of economic uncertainty, negotiating favorable
payment terms with suppliers can ease cash flow pressures:

• Extended Payment Terms: Request longer payment periods to improve liquidity, especially for high-cost goods affected by tariffs.
• Trade Finance Instruments: Use tools like letters of credit or credit insurance to safeguard against payment defaults, currency fluctuations, and political instability.
• Volume-Based Discounts: Leverage your purchasing power to negotiate bulk discounts or rebates to offset increased costs.

Strong financial strategies can help protect profits and maintain stability in uncertain times.

Conclusion

The US-China trade war and its ripple effects underscore the importance of agility in B2B sourcing. By diversifying supply bases, assessing tariff risks, strengthening supplier relationships, monitoring political developments, and exploring nearshoring or reshoring, sourcing professionals can mitigate risks and create resilient supply chains. Additionally, negotiating favorable payment terms and leveraging trade finance can help companies maintain financial health.

While these strategies require upfront effort and investment, they will position your organization for long-term success in an increasingly volatile global trade environment. Proactive adaptation is no longer optional—it's essential for thriving in today's complex sourcing landscape.

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