The Impact and Response of Trump's Tariff Policies on the Chinese Economy in 2025

一、Policy background and core terms

On April 3, 2025, US President Trump signed an executive order announcing a new round of tariffs on approximately $1.2 trillion worth of Chinese goods exported to the US, with a focus on the four major sectors of automobiles, semiconductors, new energy, and biomedicine. This marks the beginning of a "precision strike" phase in the US China trade friction. The policy includes three core contents:

Tax rate classification and dynamic adjustment: tariffs on goods such as automobiles and parts, photovoltaic modules, and lithium batteries have been raised to 25%, tariffs on strategic materials such as semiconductor materials and anti-cancer drugs have been raised to 45%, and retrospective punitive tariffs have been implemented on transit trade goods.

Supply chain traceability mechanism: Require imported goods to provide a certificate of origin for the entire industry chain, impose additional taxes on goods containing more than 15% Chinese components, and restrict US companies from using Chinese rare earth processing products.

Cross disciplinary linkage sanctions: Simultaneously freeze the US dollar settlement channels of 12 Chinese technology companies, and prohibit US pension funds from investing in Chinese concept stocks related to artificial intelligence and quantum computing.

二、Analysis of the Impact on Key Industries

（一）The new energy vehicle industry chain is facing the risk of chain breakage‌

Although the scale of China's direct exports of new energy vehicles to the United States is only 116000 units (accounting for 1.8% of the total), the "curve export" model through Mexico has been blocked. Tesla's Shanghai factory was forced to interrupt the supply of 4680 batteries to the North American market, while BYD's assembly plant in Mexico faced a 25% retrospective tariff, resulting in an increase of approximately $12000 in bike costs. In the field of power batteries, the United States requires local car companies to purchase 40% of lithium battery cathode materials that are not made in China. Companies such as CATL and BYD may lose approximately $3 billion in annual orders.

（二）The semiconductor industry is facing a dual blockade of technology and tariffs‌

The tariff on mature process chips above 28 nanometers has been raised to 30%, coupled with the US embargo on equipment below 14 nanometers from SMIC and Changjiang Storage, resulting in a 12% -15% increase in production costs for domestic semiconductor companies. Huawei, Hisilicon, and other companies were forced to shift their 28 nanometer chip foundry orders to South Korea's Samsung, but the US simultaneously restricted the proportion of South Korean companies using US technology, forming a "technology fence". The interruption of EDA tool supply has forced Chinese semiconductor companies to extend their research and development cycles by 6-8 months, affecting downstream industries such as 5G base stations and intelligent vehicles.

（三）Accelerating the Relocation of Traditional Manufacturing Industries and Employment Pressure‌

The labor-intensive industries such as textiles and furniture are most significantly impacted by tariffs. Taking Dongguan, Guangdong as an example, the average profit margin of furniture companies exporting to the United States has dropped to 3% -5%. The 25% tariff will cause about 60% of small and medium-sized enterprises to suffer losses. It is expected that 20% -30% of production capacity will be transferred to Vietnam and Indonesia in the second half of 2025. The migration wave may lead to the loss of about 500000 manufacturing jobs in the Pearl River Delta region, and the unemployment rate may climb from 3.8% to 5.2%.

三、Macroeconomic chain reaction

（一）Adjustment of Foreign Trade Structure and Challenges of Market Diversification‌

The proportion of China's exports to the United States is expected to decrease from 17% in 2024 to 12% by the end of 2025, while the growth rate of exports to the European Union and ASEAN will increase to 9.3% and 13.5% respectively during the same period. But in the short term, trade transfer is difficult to fill the gap:

The EU has launched an anti-dumping investigation into Chinese photovoltaic modules, demanding that the supply chain be "de Sinicized" by 2026;

The capacity of ASEAN countries to undertake production is limited by infrastructure shortcomings, with logistics costs in Ho Chi Minh City, Vietnam being 18% -25% higher than in China, weakening China's competitiveness in transferring industries.

（二）The 'scissors gap' between inflation and growth is widening‌

The rise in imported raw material prices has driven PPI up by 2.3 percentage points, but weak consumer demand has resulted in CPI growth of only 1.8%, creating a contradiction between industrial inflation and consumer deflation. Taking the automotive industry as an example, the import cost of rare earth permanent magnet materials has increased by 35%, but the domestic price war for new energy vehicles continues, and the gross profit margins of car companies such as BYD and NIO may be compressed to 8% -10% (15% -18% in 2024).

（三）Capital Flow and Financial Market Fluctuations‌

The US restrictions on pension fund investments in Chinese concept stocks have led to a daily decline of 4.5% in the Hong Kong tech sector, causing the market value of companies such as Alibaba and Tencent to evaporate by approximately $120 billion. Overseas investors have sold A-shares net for three consecutive months, and the outflow of northbound funds in the first quarter of 2025 reached 38 billion yuan, causing the RMB exchange rate to depreciate under pressure to the 7.35 mark.

四、The trend of global supply chain restructuring

（一）The formation of the "China+2" strategy for multinational corporations‌

Apple will reduce iPhone production capacity from 85% in China to 65%, and add 15% production capacity each in India and Thailand; Tesla suspends expansion of its Shanghai factory and invests $5 billion to build a 4680 battery super factory in Texas. This decentralized layout increases global supply chain costs by 8% -12% and extends delivery cycles by 10-15 days in industries such as mobile phones and automobiles.

（二）Accelerating the formation of regional production networks‌

North American sector: Mexico's exports of automotive parts to the United States are expected to increase by 23% to $145 billion, but the localization rate requirement forces Chinese companies to invest in building supporting industrial parks, resulting in a 30% increase in single factory investment costs;

Southeast Asia region: Vietnam undertakes electronic assembly capacity and attracts an additional investment of $12 billion from companies such as Samsung and Luxshare Precision by 2025. However, its semiconductor packaging and testing yield rate is only 92% (compared to 98% in China), which hinders industrial upgrading.

五、China's Strategic Response and Breakthrough Path

（一）Short term countermeasures and market regulation‌

Tariff reciprocal countermeasures: impose 25% -30% tariffs on US $54 billion worth of goods such as soybeans, airplanes, and medical devices, while expanding foreign investment access in the financial and medical fields to attract Tesla and General Electric to expand their investments in China;

Industrial relief policy: Establish a 200 billion yuan export enterprise transformation fund, provide 3% subsidized loans to the severely affected textile and furniture industries, and alleviate the cash flow pressure of enterprises through value-added tax retention and refund.

（二）Medium - and long-term technological breakthroughs and internal circulation strengthening‌

The "2030 Plan for Third Generation Semiconductors" aims to invest 300 billion yuan over five years to break through 35 key technologies such as silicon carbide substrates and extreme ultraviolet lithography, with the goal of achieving full industry chain autonomy of 14 nanometer chips by 2028;

Tapping into the potential of the consumer market: Launching the "Green Intelligent Home Appliances Going to the Countryside 2.0" initiative, with a fiscal subsidy of 15 billion yuan to stimulate the rural market, it is expected to drive domestic demand growth by 0.8 percentage points.

（三）International Rule Game and Deepening Cooperation‌

Breakthrough in multilateral mechanisms: accelerate tariff reductions under the RCEP framework, promote the resumption of negotiations on the China EU investment agreement, and strive to increase the ASEAN trade share to 20% by 2026;

Exploring emerging markets: Building 12 cross-border economic and trade cooperation zones in Africa and Latin America, transferring excess production capacity such as steel and photovoltaics through the "overall output of the industrial chain" model, with the goal of increasing exports to Africa by 25% by 2025.

六、The profound transformation of the global economic and trade landscape

This tariff policy marks the end of the "Globalization 2.0" era, and the world presents three major characteristics of fragmentation:

Split of technical standards: China and the United States have formed two sets of technological systems in the fields of 5G and artificial intelligence, forcing companies to maintain "dual version" research and development, with an average annual increase in compliance costs of $800-1.5 billion;

Currency settlement fragmentation: The coverage of the Chinese yuan cross-border payment system (CIPS) has increased to 182 countries, and the transaction volume in the first quarter of 2025 has increased by 37% year-on-year, weakening the dominant position of the US dollar in Asian trade;

The instrumentalization of climate issues: The United States has imposed an "environmental surcharge" on Chinese steel and aluminum materials under the guise of carbon tariffs, forcing China to accelerate low-carbon transformation in the steel industry. The target for the proportion of electric furnace steel in 2025 will be increased from 12% to 20%.

Conclusion

Trump's new tariff policy is not only the ultimate manifestation of protectionism, but also an accelerator for global power transfer. For China, short-term pains will test the resilience of the industrial chain, but long-term technological breakthroughs and market diversification may become a historical turning point for the transition from a "manufacturing power" to an "innovation powerhouse". The ultimate outcome of this game depends not only on China's strategic determination, but also on whether humanity can rebuild a consensus on inclusive development amidst division.