Trump's Tariffs vs. China's Resilience: Trade War Enters High-Stakes Phase

U.S. President Donald Trump has abruptly terminated trade negotiations with Canada, citing an anti-tariff advertisement featuring Ronald Reagan, a move that could refocus Washington's trade strategy toward Beijing amid escalating tensions, according to a BBC report. The decision, announced via Truth Social, follows Trump's imposition of a 35% tariff on Canadian imports and sector-specific levies on metals and automobiles, as covered by the BBC. With Canada-U.S. trade talks now in limbo, analysts suggest the shift may embolden China, which has already demonstrated resilience to U.S. tariffs through supply chain diversification, analysts at Capital Economics say.

The termination of Canada talks comes as Trump ramps up pressure on China, threatening tariffs of up to 155% on Beijing's goods starting November 1 if a trade deal is not finalized, according to Business Standard. The president, who has framed his approach as a mix of "pressure and diplomacy," reiterated his commitment to meeting Chinese President Xi Jinping at the APEC summit in South Korea, reported by ABC News. However, China has pushed back, with Foreign Ministry spokesperson Lin Jian calling Trump's threats "not the right way to deal with China." Beijing's recent export restrictions on rare earth materials—critical for U.S. tech and defense sectors—have further complicated negotiations, according to a Mezha report.

Global markets have already reacted to the escalating standoff. The combined impact of Trump's tariff threats and China's export controls triggered a sell-off in equities and crypto assets, with over $329 million in liquidated crypto positions reported in 24 hours, according to Yahoo Finance. Meanwhile, U.S. agricultural sectors, particularly Iowa farmers, brace for renewed trade penalties, as Trump's tariffs on China, Mexico, and Canada threaten billions in lost exports, the Des Moines Register reports.

China's economy, however, has shown unexpected resilience. Despite a 0.3% GDP drag from U.S. tariffs, Capital Economics analysts note that global supply chains have adapted to mitigate damage, with non-Chinese producers filling gaps in U.S. demand. Beijing's "Dual Circulation" strategy—boosting domestic consumption while securing alternative export markets—has further insulated its economy, as noted by StreetInsider.

The Trump administration has sought to counter China's strategic advantages, including a $8.5 billion rare earth deal with Australia aimed at reducing reliance on Beijing's supply chains, a move covered by Yahoo Finance. Yet, the move has not quelled concerns over China's dominance in critical minerals. Trump has also highlighted Beijing's alleged profiteering from U.S. opioid crises, accusing China of smuggling fentanyl via Venezuela despite paying billions in tariffs, according to RBC News.

With both sides trading retaliatory measures, the path to resolution remains uncertain. While Trump has signaled openness to a "fantastic deal" with Xi, the U.S. president's hardline stance—paired with Canada's trade standoff—risks deepening economic fragmentation. Upcoming talks in Malaysia between U.S. and Chinese delegations, ahead of a potential Trump‑Xi meeting, may offer a chance to stabilize relations, according to a ScanX report. For now, global markets brace for further volatility as the U.S.-China trade war enters a new phase, as noted by StreetInsider.

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