Using basic arithmetic, we can explore what the numbers should say regarding the bilateral trade figures between the US and China. China's trade surplus with the US should still be rising because of US fiscal stimulus. Effects from US stimulus plus the net drag on Chinese economy from tariffs might roughly be a wash or even a slight positive for China’s growth. If you factor in $400bn in global wealth creation from US stimulus (~2% of US GDP), and assume, as a middle-ground figure, that 65% sticks domestically (i.e., 35% flows abroad), with 30% of what goes abroad ending up in China (to match the weighting in bilateral trade) that comes to $42bn. If you calculate expected drag of US tariffs on China – monetary volume of goods tariffed multiplied by their nominal rates – you have: $50bn * .25 + $200bn * .10 = $32.5bn. This of course assumes elasticities of 1 for simplicity, which is likely too high considering the short-term and too low when considering the long-run. That's more or less a negligible change ($42bn - $32.5bn), though it depends on the exact elasticities. Moreover, the $200bn in tariffs don't go into effect for another two months and China's bilateral surplus is very likely to increase with the US in 2018, and the impact won't fully spill into the data until 2019. $200bn might seem like a hefty figure – it’s ~1% of US GDP and ~1.7% of Chinese GDP – but the 10% tariff rate is relatively low, amounting to just ~0.1% of US GDP and ~0.17% of China GDP. Also, one can't consider tariffs in isolation without thinking of second- and third-order effects. When new taxes, rules, regulations, etc., are set up, it shifts incentives and it is not inevitable that there is a “deadweight loss” involved – or at least to the extent that might be dictated by examining first-order consequences. For example, an interesting arbitrage opportunity involves Brazil (world's top soybean exporter) buying up to 1 million tons of US soybeans – now trading at a discount to Brazilian beans – to satisfy domestic demand while moving its own (premium-priced) beans off to China. Moreover, if Chinese companies have inventories of goods subject to tariffs, expect them to expedite their sale. US crude oil exports to China will fall, as oil is a global market because of relatively straightforward logistics. China can simply buy from non-US partners and any compression in WTI from muted Chinese demand will pick up the demand from elsewhere. Currency effects can’t be ignored either. If China allows the yuan to move from the high end of the undeclared CFETS band to the weak end, that can offset tariff effects as well. A weaker currency makes goods more attractive on the international market by effectively cheapening them and loosens financial conditions more broadly. The expansion of dollar-denominated debt in China also limits the extent to which monetary authorities can depreciate the yuan. The PBOC is fully aware of this and has clamped down on banks and property developers who most commonly participate in this type of funding. Most of China’s debt is denominated in its own currency, which makes its debt situation easier to manage, though dollar-denominated debt has grown 29% y/y to $1.8tn (15% of GDP). While China’s credit expansion will continue, non-bank credit growth has nonetheless been shrinking. The growth in wealth management products and shadow lending growth has been stemmed as well, as evidenced by China’s M1 growth falling below M2 growth in March 2018. China responded by cutting reserve requirements, a form of monetary easing. China also has to balance its toleration for renminbi depreciation with capital outflows, especially considering recent history (Aug 2015 depreciation followed by major outflows in Dec 2015). The math can of course be revisited if tariffs extend to all ~$500bn in Chinese exports to the US. But the biggest risk to China's economy is not US trade, but rather its own domestic tightening. Short-term rates are currently falling in China and have been since the beginning of the year. Considering US tariffs/tariff threats and the concentration of local government debt maturing within the next year (including plenty of non-investment grade debt) this is broadly positive. Bottom line: This is still more about political economy than anything else.