By Hasan Muhammad

Editor's Note: The writer is a freelance columnist on international affairs based in Karachi, Pakistan. The article reflects the author's opinions and not necessarily the views of China Economic Net.

On April 2, 2025, President Trump imposed a brutal 34% tariff on Chinese imports, which has caused significant reverberations across China's economy. This tariff hike has had an immediate impact, raising the average total duty on Chinese exports to the U.S. to approximately 70%. The immediate fallout from these tariffs is predicted to be severe, with economists forecasting a potential reduction of 1 to 2 percentage points in China's GDP growth for the year.

The tariff imposition signals a further deepening of the trade conflict between the world's two largest economies, and it comes at a time when China's own economy is already grappling with internal challenges, such as the weakening property market and rising unemployment.

In response to these external pressures, China's government, in addition to slapping specific tariffs on American products, has intensified efforts to stimulate domestic consumption as a way of reducing the economy's reliance on exports. Among the most significant of these measures are initiatives aimed at increasing wages, enhancing pensions, and improving social services.

By stimulating spending, the government hopes to create a more self-sustaining economy that is less susceptible to the fluctuations of the global market. In recent years, China has sought to shift its economic model from one primarily driven by exports to one more reliant on domestic consumption. This shift aligns with the government's "dual circulation" strategy, a comprehensive framework designed to balance the domestic and international dynamics of the Chinese economy. While the initiative aims to reduce the reliance on global markets and foster internal growth, external challenges - most notably the escalating trade tensions with the United States - have added new complexity to this strategic pivot.

The U.S. has long been a key trading partner for China, but as the tariff wars intensify, the economic landscape is becoming increasingly turbulent. With global trade disrupted, China is now left with the imperative task of boosting its domestic market, making significant shifts in policy, and attempting to build economic resilience at home. However, the road to achieving these goals is not without its challenges.

Despite these hurdles, there are significant opportunities for China to pivot towards long-term growth by focusing on urbanization and technological advancement. The government's National New-Type Urbanization Plan, which aims to urbanize 250 million rural residents by 2026, could provide a major boost to domestic consumption. This ambitious plan seeks to expand the urban middle class, which is expected to be the driving force behind China's future consumer market. As millions of people move to cities, they will not only contribute to increased demand for goods and services but also help to foster innovation and economic diversification. Moreover, urbanization brings with it the infrastructure investment necessary to modernize the economy, positioning China for greater resilience in the years to come.

At the same time, China is doubling down on its technological ambitions, especially in sectors like artificial intelligence, 5G, and electric vehicles. The "Made in China 2025" initiative, which focuses on reducing the country's dependence on foreign technology, aims to position China as a global leader in these areas. By focusing on cutting-edge technologies, China hopes to foster its own tech giants that can dominate international markets and reduce vulnerability to foreign trade conflicts.

For instance, the electric vehicle (EV) sector, in which China is already a world leader, presents tremendous opportunities for both domestic consumption and export growth. In 2024, China sold nearly 13 million electric vehicles, with more than 60% of these being battery-only EVs. The country's push for green technology is not only in line with global sustainability trends but also provides an avenue for China to gain an upper hand in the global automotive market, which has been increasingly shaped by the transition to cleaner energy sources.

China's economic future will be shaped by its ability to tackle the changing global trade environment while simultaneously fostering domestic consumption and technological innovation. The country's efforts to modernize its economy are commendable, but much work remains to be done. By focusing on its strengths - such as urbanization, technological advancement, and the electric vehicle sector - China can position itself to emerge from these turbulent times stronger and more resilient than before.