China’s Strategic Success in US Tariff Negotiations

The Effectiveness of “Hardline Diplomacy” and Implications for Japan
China’s Strategic Success in US Tariff Negotiations

The Effectiveness of “Hardline Diplomacy” and Implications for Japan

Executive Summary

On May 12, 2025, the United States and China reached a dramatic tariff reduction agreement. US tariff rates on Chinese goods dropped from 145% to 30%, while Chinese tariff rates on US goods fell from 125% to 10%, establishing a 90-day framework for continued negotiations. This agreement resulted from China’s successful “hardline diplomacy” tactics, shocking other nations that had adopted traditional “cooperative approaches.”

This report analyzes the specific negotiation tactics employed by China, identifies the factors behind their success, and presents implications and lessons for Japan and other nations.

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1. Background and Timeline

1.1 Escalation of Tariff Retaliation

In April 2025, President Trump’s “reciprocal tariff policy” initially imposed a 34% tariff on Chinese goods. However, China’s equivalent retaliation triggered an unprecedented tariff war between the two nations.

Tariff Escalation Timeline:

• April 2: US imposes 34% reciprocal tariff on China
• April 4: China retaliates with equivalent 34% tariff
• April 9: US adds punitive 50% surcharge
• Mid-April: Tariff rates reach extremely high levels – US 145%, China 125%

1.2 Severe Economic Impact

According to Mizuho Research & Technologies estimates, continued high tariffs would have reduced China’s GDP by approximately 2.5 percentage points. However, China maintained its hardline stance despite accepting significant economic damage.

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2. China’s Negotiation Tactics: “Seven Pillars” Analysis

2.1 Equal Retaliation and “Mutual Pain” Strategy

Tactical Overview: China responded to every US tariff measure with equivalent or greater retaliatory tariffs, clearly rejecting any unilateral concessions.

Specific Measures:

• Immediate 34% retaliation against US 34% tariff
• Proportional countermeasures against additional measures
• Clear messaging: “We will go all the way to the end”

Effectiveness: Created a “mutually assured destruction” scenario where tariff rates reached unintentionally high levels exceeding 100%, inflicting serious damage on both economies.

2.2 Negotiation Refusal as Psychological Pressure

Tactical Overview: President Xi Jinping’s continued refusal of President Trump’s repeated requests for phone conversations created urgency on the US side to begin negotiations.

Specific Actions:

• Rejection of direct leader-to-leader dialogue
• Conditional acceptance of working-level discussions
• Setting “demonstration of sincere attitude” as negotiation prerequisites

Psychological Effect: Reversed the positions of negotiation seeker and sought-after party, allowing China to enter negotiations from a more advantageous position.

2.3 Multi-dimensional Countermeasures and Encirclement Strategy

Tactical Overview: China employed non-tariff measures alongside tariffs, applying pressure on the US from multiple directions to strengthen its negotiating position.

Specific Measures:

• Rare Earth and Critical Mineral Export Controls: Direct impact on US strategic material procurement
• Adding US Companies to “Unreliable Entity List”: Sanctions against individual companies
• Dual-use Item Export Restrictions: Pressure under the guise of preventing military-civilian technology leakage

Strategic Intent: Extended beyond mere tariff issues to exercise Chinese influence across broad areas affecting US economic security, demanding comprehensive solutions.

2.4 Securing Negotiation Initiative Through Condition Setting

Tactical Overview: China set clear preconditions for beginning negotiations, demanding preliminary concessions from the US side to gain control of the negotiation agenda.

Set Conditions:

• Cessation of threats and intimidation
• Dialogue based on equality, respect, and mutual benefit
• Formal appointment of negotiation representatives
• Expression of intent to withdraw unilateral tariff measures

Effect: Established a China-favorable framework before negotiations began, making US concessions a fait accompli.

2.5 International Opinion Division Strategy

Tactical Overview: China deployed an international messaging strategy criticizing US tariff policy as “imperialistic” and deterring other countries from following the US lead.

Specific Actions:

• Warning that “appeasement brings no peace”
• Calling on BRICS nations to resist the US
• Threatening “countermeasures” against deals sacrificing Chinese interests

Strategic Objective: Prevented the US from forming an anti-China coalition through bilateral negotiations with other countries, avoiding international isolation.

2.6 Long-term Preparation Through Economic Structural Transformation

Tactical Overview: Since the first Trump administration, China had strategically reduced its dependence on US exports, building resilience against trade wars.

Structural Advantages:

• Gradual reduction of US export dependence
• Development and diversification of alternative markets
• Promotion of domestic demand-driven economy
• Non-dependence on the US in security matters

Long-term Perspective: Practiced “strategic patience,” accepting short-term economic damage while prioritizing long-term strategic objectives.

2.7 “All-or-Nothing” Negotiation Approach

Tactical Overview: China rejected half-hearted compromise proposals, forcing a choice between fundamental solutions or negotiation breakdown, extracting significant US concessions.

Negotiation Stance:

• Rejection of gradual tariff reduction proposals
• Insistence on comprehensive solutions
• Clear refusal of compromise intermediate proposals

Result: Achieved a significant reduction to 30% rather than the approximately 54% tariff reduction initially envisioned by the US.

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3. Success Factor Analysis

3.1 Accurate Assessment of US Structural Vulnerabilities

China accurately analyzed the following vulnerabilities in the US economy and incorporated them into its tactics:

Direct Impact on Consumer Prices:

• Tariff-induced retail price increases directly affecting US households
• Concerns about political impact on midterm elections
• Calculated timing of inventory depletion and product shortages

Serious Damage to Corporate Activities:

• Supply chain disruption risks causing production stoppages
• Difficulty securing alternative sourcing
• Impact on long-term contracts and expanding uncertainty

3.2 Maintaining Domestic Political Unity

Leveraging Anti-American Sentiment: The Chinese government skillfully utilized domestic anti-American sentiment to maintain political support despite harsh economic conditions.

Patriotic Mobilization: Positioned the trade war as a “fight to defend national dignity,” fostering national unity.

3.3 Superiority in Information and Messaging Warfare

Consistent Message Delivery:

• “We don’t want to fight, but we’re not afraid to fight”
• Adherence to principles of “equality, respect, and mutual benefit”
• Emphasis on the importance of international law and WTO rules

Securing Moral High Ground: Successfully criticized the US as “rule-breaking” and “unilateral” while positioning China as the “victim.”

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4. International Impact and Ripple Effects

4.1 Paradigm Shift in Negotiations

China’s success raised questions about the effectiveness of traditional “cooperative approaches.”

Expert Analysis: Marco Papic of BCA Research noted: “Many countries and regions may learn from China that the right way to negotiate with President Trump is to maintain a strong stance, stay calm, and make him surrender.”

Impact on Other Countries:

• Strategic reviews by EU, South Korea, and other cooperative-approach nations
• Questioning of “no retaliation” policies
• Consideration of more hardline negotiation stances

4.2 Decline in US Negotiating Power

Exposure of “Weakness”: The fact that the US side made substantial concessions in the China agreement exposed a “weakness” that could reduce US negotiating power in discussions with other countries.

Impact on Bilateral Negotiations: The likelihood has increased that countries will adopt tougher negotiation stances, referencing China’s success.

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5. Lessons and Strategic Implications for Japan

5.1 Elements to Learn from Chinese Tactics

1. Adherence to the Principle of Equality

• Resolute response to unilateral concession demands
• Advocacy for negotiation frameworks based on mutual benefit
• Departure from “supplicant diplomacy”

2. Preparation of Multi-dimensional Countermeasures

• Utilization of economic interdependence relationships
• Active invocation of international law and multilateral rules
• Strengthening relationships with alternative partners

3. Clarification of Long-term Strategy

• Balance between short-term interests and long-term national interests
• Gradual correction of structural dependencies
• Cultivation of strategic patience

5.2 Japan-Specific Constraints

Security Constraints: Unlike China, Japan depends heavily on the US for security, making it difficult to take a completely equal stance in economic negotiations.

Economic Scale Differences: The risks of adopting similar hardline tactics are relatively higher for Japan, which lacks China’s economic scale and market influence.

Importance of Alliance Relations: Confrontational approaches that could damage the foundation of the US-Japan alliance may be contrary to Japan’s national interests.

5.3 Strategic Recommendations for Japan

1. Adoption of “Constructive Hardline Approach”

• Balance between cooperation and resolute attitude
• Consistent arguments based on principles
• Clear demands for reciprocity

2. Enhanced Utilization of Multilateral Frameworks

• Strengthened cooperation within G7 and G20
• Active involvement in WTO reform
• Leading role in regional economic integration

3. Diversification of Negotiating Power Sources

• Maintenance and expansion of technological superiority
• Utilization of influence in finance and investment
• Strategic deployment of soft power

4. Domestic Opinion Consolidation

• Formation of national consensus on national interests
• Strengthening negotiating power through political unity
• Improvement of media strategy

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6. Future Prospects and Challenges

6.1 Post-90-Day Scenario Predictions

The current US-China agreement is a 90-day interim measure, with developments after July drawing attention.

Scenario Analysis:

• Extension Scenario: Both countries agree to additional negotiations and extend interim measures
• Partial Agreement Scenario: Long-term agreement reached in limited fields
• Re-confrontation Scenario: Negotiation breakdown and tariff re-escalation

6.2 Impact on International Trade System

China’s success poses new challenges to the traditional multilateral trading system.

Institutional Impact:

• Relative decline in WTO function
• Increased importance of bilateral negotiations
• Generalization of “might makes right” negotiations

Normative Impact:

• Changed perceptions regarding legitimacy of retaliatory measures
• Revival of “balance of power” concepts in economic diplomacy
• Declining trust in multilateral cooperation

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Conclusion

China’s success in US tariff negotiations marked an important turning point in modern economic diplomacy. As traditional “cooperative approaches” showed their limitations, the effectiveness of what might be called a “constructive hardline approach” was demonstrated.

While it would not be realistic for Japan to directly imitate Chinese tactics, there are many lessons to be learned from the factors behind China’s success. In particular, three elements—adherence to the principle of equality, preparation of multi-dimensional countermeasures, and clarification of long-term strategy—will serve as important guidelines in future US negotiations.

However, Japan must carefully consider the balance between its position as an ally and its national interests, developing its own unique approach that might be called a “constructive hardline approach.” While learning from China’s success, Japan needs to establish a diplomatic style that combines Japanese dignity with strategic thinking.

As international circumstances become increasingly uncertain, the development of strategic diplomatic policies utilizing these lessons will be key to securing Japan’s national interests and enhancing its international standing.