As the US-China trade war intensifies, Beijing is pulling out all the "tools" in its tool box to "cushion the blow".
And Chinese President Xi Jinping himself is reportedly busy preparing for a tour of several South-East Asian countries to solidify its trade relations.
Experts say the astonishing 125 per cent tariffs announced by Donald Trump on all goods imported from China comes at a precarious time for Beijing.
But they also say Beijing has options of its own to inflict pain in the trade war.
After years of momentous growth, China's economy has stalled since the country emerged from its draconian response against the COVID-19 pandemic.
It was weighed down by weak domestic demand, a high unemployment rate and a persistent property slump.
Wen-Ti Sung is a nonresident fellow with the Atlantic Council's Global China Hub.
"Certainly China will be looking at this new wave of tariffs with great concern and anxiety. China's economy has been struggling over the past few years," he told the ABC.
Although the US share of China's exports has been steadily declining since 2018, it still accounted for 14.7 per cent in 2024.
China softens the blow
Professor Jeanne Huang, associate professor at the University of Sydney Law School, said while she's "pessimistic" about the long-term impact of Mr Trump's 125 per cent tariff on China's economy, she believes the short-term effects can be manageable.
"The Chinese government has a lot of tools to stabilise the economy," she said.
"They will use all resources to cushion the blow — such as stabilising the stock market and controlling the media narrative. They will show statistics, like GDP numbers, to demonstrate that China can handle US pressure."
On Monday, Chinese state-owned firms moved to support stock prices following sharp market declines.
The People's Bank of China also allowed the yuan to weaken modestly against the US dollar, making Chinese exports cheaper while carefully managing capital outflow risks.
Professor Fariborz Moshirian is director of the Institute of Global Finance at the University of New South Wales.
"China is also trying to stimulate domestic consumption and reach out to the EU and East Asian countries to increase exports in those markets," Professor Moshirian said.
President Xi is reportedly preparing for official visits to Malaysia, Vietnam and Cambodia, with trade high on the agenda.
At the same time, Chinese Commerce Minister Wang Wentao is engaging in dialogue with EU counterparts and the chair of ASEAN, Malaysia's Trade and Investment Minister Tengku Zafrul.
Beijing has also convened meetings with representatives from more than 20 US-based companies, including Tesla, GE Healthcare, and Medtronic, to "reaffirm commitment to opening up".
On Wednesday, Chinese ambassador to Australia Xiao Qiang also penned an article in The Sydney Morning Herald, calling on Australia to "join hands to defend the multilateral trading system".
However, China's biggest advantage in this trade war, according to Professor Huang, is that "psychologically, Chinese people are very united."
"Many see this as a just cause to resist US pressure," she said.
What's in China's toolbox?
In contrast, Mr Trump's tariff escalation faces mounting skepticism at home.
A Reuters/Ipsos poll found that three in four Americans expect prices to rise as a result of the new tariffs, fuelling fears of higher living costs at a time when inflation remains a major concern.
This creates room for targeted retaliation, according to Mr Sung.
"China will try to retaliate in a way that hurts the US economy generally, but Trump's electoral coalition specifically," he said.
"I can see China targeting the agricultural export sector because it's a key part of Trump's electoral base — the so-called 'Hillbilly Elegy' electorate made famous by JD Vance.
"China may also focus on financial services — targeting US investment banks and management consultancies, another key part of Trump's support base."
In its retaliation against Trump's tariff policy, China also announced export control of minerals critical for US' semiconductor and defence industry.
In recent years, China has increasingly relied on creating regulatory hurdles and expending its "unreliable entity list" to target American firms.
"They'll aim to get American businesses to pressure Trump into negotiations, even if Trump is not initially inclined to talk to China," Professor Moshirian said.
"Both countries will suffer in the trade war, albeit with different levels of exposure.
"Many American companies are exporting goods and services from China to the US; they will be significantly impacted, as will American consumers who will end up paying more for many low-value-added products produced and packaged in the US.
"Trade war will even influence the pace of global geopolitical tensions and rivalries. They will also reduce other non-trade bilateral relationships between the US and China, including the arms race and nuclear proliferation," Professor Moshirian said.
So far, it remains unclear whether Beijing will retaliate against Mr Trump's latest move to raise tariffs to 125 per cent, from the original 54 per cent announced on "Liberation Day."
The initial 54 per cent tariff led China to impose a 34 per cent tariff on American goods, which then prompted the United States to escalate further, raising tariffs to 104 per cent.
China replied with an 84 per cent tariff.
Mr Trump responded to that with a shock reversal: a 90-day pause on many of the country-specific tariffs announced on his "Liberation Day".
Except for China, because he simultaneously announced his latest gambit: raising tariffs on Chinese imports a staggering 125 per cent.
However, the 10 per cent blanked tariff on almost all US imports remains.
Professor Moshirian says the reversal is propelled by "a significant sell-off of US Treasury bonds and a loss of confidence in the US as a global leader".
"It seems that many Republican members of Congress have now decided to collaborate with Democrats to ensure that Trump is no longer able to act unilaterally with respect to introducing tariffs and related issues without the involvement of Congress."
Last Thursday, senior senators introduced new bipartisan legislation aimed at reclaiming some of Congress's authority over tariffs, although analysts note it has slim chance of passing.
Mr Trump has also indicated he would veto such a bill.
What does this mean for the world?
Economists have warned the world may face a global recession, as the China-United States trade war escalates dramatically this week.
"If the trade war with high tariffs are going to continue between the US and China, there is a great chance of significant global economic slow down and even global recession," said Professor Moshirian.
China's 20-year trade surplus with the United States, which he argues has hollowed out America's industrial base and left the US economy "a patient that was very sick."
"There will definitely be significant reshuffling of the global economy," Mr Sung said.
"We used to have a largely singular global economy, anchored around US leadership and institutions. Now it's far less clear.
"We may end up with two rival economic blocs instead."
Since Mr Trump's first term, China has accelerated trade with emerging markets as tensions with the United States have risen.
In 2023, ASEAN overtook the US as China's largest export market.
Meanwhile, the US had encouraged supply chain shifts toward Vietnam, India, and Mexico to reduce reliance on Chinese manufacturing — moves that were complicated when Mr Trump imposed substantial tariffs on those countries as well.
The recently announced pause on "Liberation Day" tariffs also does not apply to tariffs on Canadian and Mexican goods, which remain subject to a 25 per cent fentanyl-related duty if they fail to meet the US-Mexico-Canada Agreement's rules of origin requirements.
"China rewards its friends. Trump's America often shows no distinction between friend and foe," Mr Sung said.
"When you make no distinction between allies and adversaries, you remove the incentive for people to be your friend."
