President Trump has imposed increased import tariffs on China, and Chinese authorities are responding by imposing higher tariffs on U.S. imports, blacklisting U.S. companies, and restricting U.S. access to rare earth elements, which are essential materials for manufacturing high-tech products.

Trump has recently seemed to express goodwill, stating that he will engage in dialogue with China in a friendly manner. China is ready to counter Trump’s earlier aggressive stance, preparing to retaliate against his sanctions in a show of reciprocity.

CNBC interviewed several officials and experts who suggested tariff sanctions and further retaliation that China could impose on the United States. CNBC spoke with Brad Setser, a researcher at the Council on Foreign Relations, who stated that China is the second-largest supplier of products to the U.S., and the importance of Chinese exports to the U.S. should not be underestimated. Before April of this year, the average tariff imposed by the U.S. on China was 20%. By the end of April, some products had already risen to 124%, leaving many traders unable to think of countermeasures due to the current situation.

Trump is ready to engage in dialogue with Chinese leader Xi Jinping, claiming he will adopt a friendly approach. However, the flames of this trade war have already been ignited, and China is prepared to retaliate. Experts say that China will take back the negotiating power from Trump, and below are the trump cards China holds.

First trump card: U.S. debt (Bonds).

The U.S. borrows money by issuing bonds, with national debt exceeding 36 trillion dollars. According to data from the U.S. Treasury Department as of February 2025, the largest foreign holder of U.S. national debt is Japan (1.126 trillion dollars), followed by mainland China (784.3 billion dollars), and the United Kingdom (750.3 billion dollars), with Taiwan ranking tenth (294.8 billion dollars).

Holding U.S. bonds gives China a certain influence over the U.S. financial market. Brad Setser stated that the U.S. bonds in China's possession account for 4% of U.S. GDP. He believes that if a large amount of U.S. debt is dumped and the Federal Reserve does nothing, individuals needing mortgages will be significantly impacted.

As of April 11 this year, the yield on government bonds has increased, with the 10-year rate at 4.48% and the 30-year rate at 4.85%. If China were to dump a large amount of its bonds, it would disrupt the U.S. financial market.

Daniel Drezner, a professor in the International Politics Department at Tufts University, said that if Japan and China both dump bonds, it would trigger panic in the financial markets. Japan is currently in trade negotiations with the United States, and as the country holding the most U.S. bonds, Japanese Finance Minister Taro Aso stated that bonds are Japan’s bargaining chip.

Second trump card: Restricting the export of rare earth elements.

China possesses the rare earths needed for high-tech industries. These rare earths are essential raw materials for both defense and technology, and China has begun to restrict the export of these rare earths to the U.S.

Third trump card: Refusal to buy U.S. oil and natural gas.

China is the third-largest exporter to the United States. China has stated it will no longer purchase oil and natural gas from the U.S., opting to use its own domestically produced crude oil.

China holds three powerful trump cards: possessing a large amount of U.S. national debt, restricting rare earth exports, and refusing to purchase U.S. oil and natural gas, all of which can have a dramatic impact on U.S. trade and financial markets. This gives China considerable leverage in the U.S.-China trade war. Although Trump claims he will adopt a friendlier approach to dialogue, experts believe China may regain the upper hand in future negotiations and be prepared for a stronger counterattack.

This article discusses how Trump will negotiate with China, with China holding three trump cards and preparing to retaliate against tariff sanctions. It first appeared in Chain News ABMedia.