Xi’s Careful Reply to Trump Tariffs Shows China Has More to Lose

The first volleys in the latest U.S.-China trade war made clear that Xi Jinping is taking a more cautious approach than during Donald Trump’s first term.

After the U.S. leader gave a last-minute reprieve to both Canada and Mexico, his 10% tariffs on China took effect after midnight Washington time on February 4. Within seconds, Beijing announced additional tariffs on roughly 80 products to take effect on February 10, launched an antitrust investigation into Google, tightened export controls on critical minerals, and added two U.S. companies to its blacklist of unreliable entities.

The swift but calculated retaliation signaled that Beijing had learned a lesson from its first trade fight with Trump, when China retaliated with tariffs on par or close to what the U.S. imposed. This time Xi only put tariffs on $14 billion worth of American products, a sliver of what Trump targeted, while taking other measures that showed off China’s ability to inflict further pain on U.S. companies if needed.

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The shift reflects Xi’s success at diversifying imports away from the U.S. since Trump’s first term, as well as China’s more precarious economic situation. The Chinese leader has been relying on manufacturing and overseas sales to keep growth ticking along as he moves to burst a property bubble, all while dealing with increased deflationary pressure.

China is being restrained because it “has more to lose,” due …