Chinese Ambassador to Hungary Gong Tao. Photo: Róbert Hegedüs
Joakim Scheffer
28/04/2025 22:23
According to Beijing’s estimates, how will the American tariffs affect the Chinese economy in the short and medium term?
China firmly opposes U.S. tariff barriers and acts of trade bullying, as such practices serve the interest of no one. They defy the fundamental laws of economics and trade principles, disrupt the world economic order, and stand in the way of global economic recovery. In the short term, staggering U.S. tariffs may put some pressure on China’s economy and foreign trade, but it does not alter the upward trend of China’s economic development in the long term. U.S. Treasury Secretary Bessent claimed that China is “playing with a pair of twos” and thus destined to lose. But President Adam Posen of the Peterson Institute for International Economics says otherwise—“Washington, not Beijing, is betting all in on a losing hand.” With a solid foundation, a wealth of strengths, strong resilience, and enormous potential in its economy, China has the confidence, capability, and determination to overcome external challenges and achieve its development goals.
First, China enjoys a robust economic foundation. More than four decades into reform and opening up, China has become the world’s second-largest economy and remained the no.1 manufacturer for 15 consecutive years. It boasts a complete industrial system and strong underpinnings for economic development. As the Washington Post noted, China’s economy got off to a strong start in 2025. With a 1.4 billion-strong population, a middle-income group exceeding 400 million people, and a per capita GDP surpassing 13,000 U.S. dollars, China has become the world’s second-largest consumer market and the largest online retail market. That gives China ample space for investment and consumption growth, which will in turn sustain its economic growth.
Second, China’s foreign trade demonstrates strong resilience. Thanks to a complete industrial system at home, Chinese products have a competitive edge globally. By exploring the global market, China’s trade structure has become more diversified. It is now a main trading partner to over 150 countries and regions and is advancing economic cooperation with Belt and Road partners. In Q1 2025, China’s exports to Belt and Road partner countries grew 7.2 per cent year-on-year; trade with these countries accounts for over 50 per cent of total trade. China’s reliance on single markets has decreased, with exports to the U.S. declining from 19.2 per cent of total exports in 2018 to 14.7 per cent in 2024. That means, as senior fellow at Bruegel Alicia García-Herrero observed, even if there was a hard cessation of Chinese exports to the U.S., the impact would not be catastrophic on China’s economy. Regardless of external challenges, China’s exports bucked the trend to grow at a rate of 6.9 per cent in Q1 2025. Global confidence remains strong, evidenced by the 137th China Import and Export Fair attracting over 110,000 overseas buyers from 216 countries and regions—a 10 per cent increase over the 135th Fair—reaffirming international demand for Chinese products.
Third, China’s domestic demand holds enormous potential. Over the past five years, domestic demand contributed an average of over 80 per cent to economic growth as the primary driving force. With current household consumption rates at around 40 per cent—significantly lower than the 70 per cent of high-income economies and the global average of 56 per cent—China’s consumption upgrade promises huge room for growth. Recent policies including the special action plan for boosting consumption, consumer goods trade-in program and the Shopping in China program at the 5th China International Consumer Products Expo are taking effect. Consumption continues to climb, as Q1 2025 saw total retail sales reach 12.5 trillion yuan, up 4.6 per cent year-on-year and 1.1 percentage points higher than 2024. China has full confidence in its economic trajectory and development prospects.
Are there any ongoing negotiations between Beijing and Washington aimed at easing tensions?
The Ministry of Commerce of China has maintained working-level communication with its U.S. counterpart. China’s position has always been clear: it remains open to economic and trade consultations with the U.S. The unilateral imposition of tariffs was initiated by the U.S. side, and as the Chinese saying goes, “He who tied the bell must untie it.” China urges the U.S. to immediately cease its maximum pressure tactics, abandon coercion and blackmail, and resolve differences with China through equal-footed dialogue based on mutual respect.
China respects all efforts to address economic and trade disputes with the U.S. through equal-footed consultations. On the issue of “reciprocal tariffs,” all parties need to stand on the side of fairness and justice and on the right side of history, and uphold international economic and trade rules and the multilateral trading system. It must be emphasized that China firmly opposes any “deal” reached at the expense of China’s interests. Should such a scenario arise, China will not accept it and will take firm and reciprocal countermeasures. It has both the resolve and capability to safeguard its legitimate rights and interests.
While the disruption to global trade is evident, U.S. tariffs may open the door to closer economic relations between China and the European Union. In which areas could the two sides support one another to mitigate the negative impact of these tariffs?
On the U.S. abuse of tariffs, former WTO Director-General Pascal Lamy stated that “among the many reasons Trump must believe (wrongly, in my view) that tariffs can fix the problems faced by the US, imposing a tariff to give it leverage and a favourable negotiating position—to extract whatever the US needs from a country, including on non-trade issues—is certainly one. But big shots like China or the EU—who are open to fair negotiations—will not cave in under intimidation. The world trading system is not about might, but about right.”
China and the EU are each other’s most important trading partners, with highly complementary economies and deeply intertwined interests. There are no fundamental conflicts of interest or geopolitical contradictions between China and the EU; instead, we are partners who contribute to each other’s success. This year marks the 50th anniversary of China-EU diplomatic relations. In the turbulent world we find ourselves in, the two sides need to work together to further advance China-EU relations, and inject more stability and certainty into the world economy.
First, it is important to strengthen communication and coordination to resolve trade frictions through consultations. The U.S. tariff hikes disrupted international trade seriously, with China, the EU and vulnerable countries feeling the impact disproportionately. Unilateralism and protectionism do good to no one. This is a lesson that everyone has learned the hard way. Prior EU tariffs on Chinese electric vehicles violate market and economic principles. Leaders like Prime Minister Viktor Orbán and Foreign Minister Péter Szijjártó have spoken out many times on the issue, warning of the risks to the EU’s own competitiveness. On April 8, during a virtual meeting, Chinese Minister of Commerce Wang Wentao and EU Commissioner for Trade and Economic Security Maroš Šefčovič agreed on starting price commitment negotiations. This marks a critical step in resolving trade friction and creating a level playing field. The positive signal of China and the EU standing together for a rule-based multilateral trading system is a shot in the arm under the current circumstances.
Second, it is important to stay open to cooperation and harness the pull of gravity between the Chinese and EU economies. As two of the world’s largest economies as well as staunch supporters of globalization and free trade, China and the EU together account for over one-third of the global economy and share a deeply interdependent economic relationship. China stands ready to work with the EU to capitalize on our complementary strengths, unlock greater potential in trade and investment cooperation, and achieve more mutually beneficial outcomes. By leveraging existing economic, trade, and technological cooperation mechanisms, the two sides can deepen collaboration and create more deliverables in such areas as trade, green economy and climate change. Cooperation in innovation is also an area of great promise where emerging fields such as artificial intelligence, electric vehicles, the digital economy, and new energy await our exploration. Efforts are also important to facilitate market access for each other’s businesses and strengthen industrial and supply chain integration.
What role could Hungary play in the potential rapprochement between China and the EU?
China has always regarded the EU as a vital pole in the multipolar world and explicitly supports the unity, development, and strength of the EU. China is willing to take the 50th anniversary of diplomatic relations as an opportunity to build on what has been achieved and steer China-EU relations toward strategic stability and mutual success, to the benefit of peoples of China and Europe as well as the international community. Hungary, as a key partner of China and an EU member state, will surely play an important role in this process.
Hungary is an exemplar for China-EU relations. In 2024, China and Hungary celebrated the 75th anniversary of diplomatic ties. During the state visit by President Xi Jinping to Hungary, the leaders of the two countries elevated the relationship to an all-weather comprehensive strategic partnership for the new era, steering the bilateral relationship onto a Golden Voyage. Practical cooperation has yielded fruitful results: in 2024, bilateral trade exceeded 16 billion U.S. dollars, up 11.6 per cent year-on-year, making China Hungary’s largest non-European trading partner and Hungary a key trading partner for China in Central and Eastern Europe. The China-Hungary relationship already transcends the bilateral scope with its contributions to the broader China-EU partnership.
Hungary is a critical link in the China-EU industrial chain cooperation. With investments in Hungary from Chinese companies such as CATL, BYD, Huayou Cobalt, and EVE Energy, an electric vehicle industrial cluster is taking shape. The upstream materials and power batteries produced meet the demand of European automakers like Mercedes-Benz, BMW and Volkswagen, while final products reach markets across Europe and beyond. This further integrates Hungary and Europe into the global new energy supply chain. As Foreign Minister Péter Szijjártó rightly observed, these investments have positioned Hungary as a battery manufacturing hub in Europe, and will give a further boost to Hungary’s economic growth and role in the global transition toward electric vehicles. Such cooperation is a stellar example of the synergy between Chinese and European industrial chains.
Hungary is a pivotal hub for China-Europe connectivity. Guided by its policy of economic neutrality, Hungary is where the East meets the West and where the Belt and Road Initiative dovetails with the Eastern Opening policy. Hungary, at the heart of Europe, now hosts 21 weekly direct flights connecting Budapest with seven Chinese cities, as an aviation hub linking China and Europe. The China-Europe Railway Express operates reliably, and the flagship Budapest-Belgrade Railway project is well underway, set to enhance connectivity in Central and Eastern Europe upon completion. Chinese financial institutions such as the Bank of China have their presence in Hungary, extending their influence across the region. In 2024, over 200,000 Chinese tourists visited Hungary—double the previous year’s figure—while China’s expanded visa-free policy for Hungarians has spurred growing interest in travel to China. Looking ahead, Hungary will play an even greater role in facilitating the flow of people, goods, and services between China and Europe
