In a significant shift from traditional trade retaliation, China has recently stated that it would cease responding to U.S. tariff increases imposed by President Donald Trump, labeling any future U.S. levies as a “joke” that Beijing intends to ignore. Instead, the Chinese government is pursuing alternative methods to pressure the U.S., particularly by targeting the American services sector.

President Trump’s administration has raised tariffs on selected Chinese goods by as much as 245%, following a series of temporary retaliatory measures. In response, China has also implemented additional duties on U.S. imports, some reaching 125%. However, rather than continuing this tit-for-tat traditional approach, China has opted for a broader strategy of imposing non-tariff barriers.

Recent actions by China include:

• Widening export controls on critical rare-earth minerals essential for high-tech industries.
• Launching antitrust investigations into prominent U.S. companies like Google and DuPont, signaling rising tensions in the technology and pharmaceutical sectors.
• Establishing an “unreliable entity” list that restricts American companies from operating within China, affecting notable corporations such as PVH and Illumina.

In one of its latest moves, China has halted Boeing deliveries, impacting the largest U.S. exporter significantly. Chinese airlines have been instructed not to accept new Boeing aircraft deliveries, compounding the manufacturer’s existing challenges amidst ongoing quality-control issues.

Moreover, Beijing’s cybersecurity stance has intensified, with Chinese authorities announcing intentions to apprehend individuals allegedly involved in cyberattacks for the U.S. National Security Agency. State media have since urged domestic businesses and citizens to avoid American technology in favor of local alternatives.

Wendy Cutler, vice president at the Asia Society Policy Institute, commented, “Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull,” indicating the multifaceted nature of these escalating tensions.

Analysts believe that China is strategically looking to broaden the trade conflict into the realm of services, an area where the U.S. has enjoyed a substantial surplus. Legal, consulting, financial, and travel services have been identified as potential targets.

Recent indications from Chinese state-affiliated media have hinted at possible restrictions on American legal consultancy firms and investigations into the monopolistic advantages enjoyed by U.S. companies due to intellectual property rights. Such measures could significantly impact the U.S. services sector, which saw U.S. services exports to China rise dramatically, surpassing $55 billion in 2024, largely fueled by travel and education-related spending.

Travel, primarily driven by the expenditure of over 270,000 Chinese students in the U.S., constitutes the majority share of this economic interaction. However, recent advisories from China regarding reduced travel and study in the U.S. pose a threat to these lucrative sectors, which some analysts estimate could see $24 billion at stake should restrictions intensify.

Looking ahead, experts expect China to continue utilizing non-tariff policy tools to strengthen its negotiating position against the U.S. A focus on major U.S. corporations such as Apple, Tesla, and companies in the pharmaceutical sector may be on the horizon as Beijing seeks to exert further pressure.

Despite ongoing tensions, Chinese officials have expressed a willingness to negotiate, provided discussions occur on equal terms. However, with both sides entrenched in their positions, hopes for a resolution appear dim, particularly as the U.S. calls for China to take the initiative in any potential negotiations.