US–China Trade War Challenges CCP’s ‘Symbolic Legitimacy’: Analysts

Beijing’s escalating trade fight with Washington threatens to deepen its economic woes, but backing down risks the CCP’s hold on power, according to analysts.

A Chinese paramilitary policeman stands guard outside the Great Hall of the People in Beijing on Feb. 26, 2025. Pedro Pardo/AFP via Getty Images

News Analysis

China’s already sluggish economy is bracing for more challenging times, as the ruling Chinese Communist Party (CCP) has vowed not to back down from a fight with the United States on tariffs, according to economics and finance experts as well as small business owners inside and outside the country.

Part of the reason lies in China’s export-led growth model, they said.

“If the United States were to shut its market to China right now, it would be catastrophic for [China], because there simply isn’t another market globally that could replace the United States,” Taiwan-based macroeconomist Henry Wu told The Epoch Times.

“China won’t be able to pivot its products to Africa, the Middle East, or South America to compensate for the lost demand from the United States.”

Amid growing concerns over China’s economic prospects, Beijing has escalated its retaliation against the recent U.S. tariff hike on Chinese imports, increasing its levies on U.S. imports to 125 percent and blacklisting dozens of U.S. companies.

Before Beijing unveiled the latest tariff hike on April 11, CCP leader Xi Jinping said there is “no winner” in the tariff war, according to China’s foreign ministry.

Xi made his first public comments on the tariff issue during a visit to Beijing by Spanish Prime Minister Pedro Sánchez.

Weak Domestic Demand

Chinese Premier Li Qiang recently acknowledged the pressures that external shocks are placing on China’s economic operations. He said Beijing is well-prepared for all uncertainties.

Li, who oversees the economy, called on the country’s experts and entrepreneurs to maintain confidence, vowing to focus on boosting domestic consumption as a “long-term strategic priority,” according to Beijing’s official readout.

Analysts are not optimistic.

If export capacity is redirected to the domestic market, Wu said, it would be “impossible” to absorb that volume through domestic consumption alone.

Chinese consumers, who tend to save money, have tightened their purse strings since the economic disruption caused by Beijing’s draconian COVID-19 pandemic measures. The frugality trend has grown amid the ongoing crisis in the property market, as many families have invested almost all their life savings in homes.

Despite the Chinese authorities rolling out a series of initiatives aimed at stimulating consumer spending—and with the premier placing this goal atop the agenda for the year—economists said they believe that the CCP faces a long journey in shifting consumer sentiment.

People walk past luxury brand stores at a mall in the financial district of Shanghai on April 14, 2025. Hector Retamal/AFP via Getty Images

“China cannot continue its export-driven economic model—the fallout will be significant,” Wu said, noting that this is not just a concern for the United States. Other nations are also wary of an influx of Chinese products diverting to their markets, in which tariffs are relatively lower.

The European Union, which has complained for years about trade imbalance and market access barriers in trade with China, has voiced concerns. During a phone call on April 6, European Commission President Ursula von der Leyen urged Li to address the “possible trade diversion caused by tariffs, especially in sectors already affected by global overcapacity,” according to the European Union’s readout.

Businesses in the eastern Chinese city of Yiwu, which exports many products—from glowing fiber-optic Christmas trees to U.S. presidential campaign merchandise—have been among the first to feel the pressure.

An owner of a major manufacturer in Yuwu said his clients, who used to buy “large amounts of goods” for export three or four times per month, have not come by recently.

“Companies focused on foreign trade are not doing well, and many employees are finding themselves with nothing to do,” the business owner, who requested to remain anonymous for fear of the Chinese regime’s reprisal, told The Epoch Times.

He mentioned that in the past, staff at these exporters had only one day off per week, but now they have three or four days off.

“The situation is quite serious,” he said.

Worsening Unemployment

Adding to the challenges, the tariff pressure may lead to factories shutting down or relocating their supply chains, putting countless jobs at risk, analysts said.

In the export hub of Guangdong Province, many factories that make electronics, lighting, garments, and other products initially had “orders from the United States piled up to the end of this year,” according to Taiwanese businessman Lee Meng-chu.

But with the U.S. tariffs on Chinese imports now shooting up to 145 percent, “all orders have been cancelled immediately, and products are piling up in the factories,” Lee told The Epoch Times.

“There is no way to do business,” he said.

Lee was an electronics trader who frequently traveled between China and Taiwan before being arrested on espionage charges in 2019. China’s state media reports at the time said that he possessed materials showing his support for pro-democracy protests in Hong Kong. After nearly two years in prison and a subsequent two-year exit ban, he returned home in 2023.

Some entrepreneurs who are thriving amid the U.S.–China trade war are reevaluating their business strategies.

A Southeast Asian businessman, who provided only his surname, Zhao, said that uncertainty about regulations and the loss of advantages related to cheap labor have made China a less attractive destination for foreign businesses to set up production. He said the additional tariffs imposed by the United States will further diminish its appeal.

People work at a Christmas tree factory for export and domestic markets in Jinhua, eastern Zhejiang Province, China, on April 11, 2025. Adek Berry/AFP via Getty Images

Zhao said he anticipates that more companies will shift their operations to other countries, potentially increasing production in Indonesia, Taiwan, Singapore, and Malaysia. He noted that while these nations are also affected by Washington’s reciprocal tariffs, none face taxes as high as those imposed on China.

This exodus may leave more young Chinese jobless, Zhao said, citing Foxconn, a Taiwanese tech giant and supplier of Apple, as an example. If it were to close its flagship plant in the southern city of Shenzhen, he said, more than 800,000 jobs would be lost.

Even before the renewed trade war with the United States, China’s youth unemployment rate hit a record high of 21.3 percent in June 2023.

Lee Tenpao, professor of economics and finance at Niagara University, said the situation could deteriorate further, with new tariffs leading to even more factory closures.

He told The Epoch Times that the resulting unemployment could be “very serious” and lead to many social problems.

The latest data from the National Bureau of Statistics show that youth unemployment rose to 16.9 percent in February, up from 16.1 percent in January. That figure is based on Beijing’s new methodology, which excludes students from the calculation.

Chinese economist Li Hengqing echoed concerns about rising unemployment, particularly as more students enter the job market this summer.

“The students who graduated a few years ago are still struggling to find jobs, and now, 12 million more will enter the labor market this year,“ he told The Epoch Times. ”What can Beijing do?

“Won’t there be social unrest in the end? So the CCP is very nervous now.”

‘A Confrontation Between 2 Ideologies’

As both countries dig in their heels, analysts said the trade fight has evolved far beyond tariffs.

While U.S. President Donald Trump faces pressures from the market and lawmakers over his handling of tariffs, Xi is grappling with a test of his political interests and the legitimacy of the CCP’s hold on power, according to economics researcher Davy J. Wong.

“The CCP itself is a tightly controlled system that rejects outside challenges, be it information, power, or dissenting voices,” Wong said.

However, inside China, “the Party elites, local officials, the private sectors, and international businesses are all watching how Beijing manages to maintain its control or justify its continued rule,” he said.

Wong characterized Beijing’s responses as “a political posture” aimed at showcasing strength and legitimacy rather than a focus on tangible results.

“Why hasn’t Xi Jinping been in a hurry to talk to Trump?” Wong said. “Because engaging before retaliating would risk losing the upper hand and even compromising the Communist Party’s symbolic legitimacy.

“This is no longer simply a tariff issue—it is a confrontation between two ideologies, social systems, and economic models.”

James Wen, professor emeritus of economics and international studies at Trinity College in Connecticut, highlighted the differences between the CCP’s worldview and that of U.S. policymakers, who consider the American people’s happiness or interests.

“This is not how the CCP sees things,” Wen said before Beijing hiked tariffs on U.S. goods to 125 percent. “The CCP always needs an enemy, and then it can rally against the ’enemy.'”

Wen said he expects the ongoing trade conflict to strain China’s faltering economy further and warned that the CCP might revert to its old playbook and use “violence and lies“ to deflect blame.

Through propaganda, the CCP can portray the United States as the source of all its woes—from a slowing economy and shrinking personal fortunes to factory closures and rising unemployment—while stoking nationalist sentiments, encouraging citizens to shoulder the burden, Wen said.

Should resistance arise, the Party can turn to violence, he said.

A passenger reads a newspaper article titled "China's Position on Several Issues Concerning China–U.S. Economic and Trade Relations," part of a white paper released by China's State Council Information Office on April 9, aboard a commercial flight from Chongqing to Shenzhen, with cabin crew working in the background, in Shenzhen, China, on April 10, 2025. Cheng Xin/Getty Images

The CCP’s propaganda machines appear to have kicked into high gear.

A senior official from the foreign ministry recently posted a video clip on social media platform X featuring former CCP leader Mao Zedong declaring, “We will never yield.”

Although access to X is blocked in China, screenshots of this post have circulated widely behind the country’s so-called Great Firewall, with state media sharing them on Weibo, China’s version of X.

Posts criticizing the U.S. tariffs also gained popularity on China’s tightly controlled social media. On April 13, six of the top 10 most viewed hashtags on Weibo were related to the negative impact of the extra duties. One hashtag, “a panda toy could cost $80 under 145 percent tariffs,” garnered more than 2 million views within two hours.

In contrast, as of April 13, Weibo’s top 50 trending list did not mention the Trump administration’s criticism of Beijing’s persistent unfair trade practices or the fentanyl issue, both of which Washington had linked to tariff increases.

Political Implications for CCP

China expert Wang He told The Epoch Times that China’s tariff war with the United States could shake up the power dynamics among the CCP’s top officials.

As tensions with Washington escalate, a sweeping purge is underway in Beijing, which has led to the ousting of more than a dozen high-ranking military leaders and Party officials. Xi’s protégés and allies have been among those targeted, fueling speculation about the mounting challenges Xi may be facing from rival factions within the Party. Some have even questioned whether Xi’s health, either political or physical, has been on the decline.

Despite a shared interest among CCP elites—whether they are loyal to Xi or part of opposing factions—in maintaining the Party’s grip on power, these elites are notably divided on engaging in a tariff war with the United States, according to Wang.

Wang said he believes that as Trump ramps up pressure on China, the most significant variable may lie within the Party itself.

“The power dynamics in the upper echelons may have already changed,” Wang said. “With the tariff war heating up, seismic political changes are unfolding.”

Luo Ya, Chang Chun, Yi Ru, and Jiang Zuoyi contributed to this report.