When the initial rounds of 10% tariffs on Chinese imports were imposed, Zou Guoqing, a seasoned exporter from the eastern Chinese city of Ningbo, felt a wave of frustration wash over him. However, he was not completely defeated. To keep his business afloat, he decided to absorb some of the added costs and offered his U.S. client, a snow-bike factory located in Nebraska, price reductions ranging from 5% to 10%. Surprisingly, this strategy proved effective; the factory placed a new order for molds and parts, indicating that the relationship could withstand the pressure.

But on April 2, everything changed. President Donald Trump announced an additional universal tariff of 34% on all Chinese goods, leaving Zou stunned and questioning the feasibility of continuing his trade with the U.S. Theres not a thread of feasibility, he said, expressing his dismay over the sudden change. It looks like I would have no choice but to give up trading with the U.S.

What followed was a series of tariff increases that pushed the total to a staggering 145%. This drastic measure forced Zou to halt shipments entirely until he believed meaningful talks could occur between the two nations leaders. We are pausing the shipments, he confirmed, reflecting the uncertainty engulfing many businesses engaged in U.S.-China trade.

As tensions reached new heights, the implications of the 145% U.S. tariff, alongside Chinas reciprocal 125% tariff, sent ripples of anxiety throughout the business community. Companies were not only anxious about their immediate orders but also concerned about their long-term viability in a landscape riddled with unpredictability. Experts are voiced concerns that the long-standing trade relationships, which have significantly benefited both economies, might be unravelling before their eyes.

Chen Zhiwu, a finance professor at Hong Kong University Business School, cautioned that if these high tariffs persist for an extended period, they could effectively decouple the American and Chinese economies. Josh Lipsky, a senior director at the Atlantic Councils GeoEconomics Center, echoed this sentiment, stating that such tariffs could create an environment resembling a trade embargo, severely limiting Chinas ability to export even low-value items like apparel to the U.S. It would also compel U.S. companies to seek sourcing alternatives outside China.

In response to the escalating tariffs, the central tariff office in China openly declared that there was no possibility for market acceptance of U.S. goods under the current tariff regime. Hu Jianlong, founder of Brands Factorya consultancy aiding Chinese firms in expanding overseasexpressed his concerns, saying, Everyones pretty worried. At this point, theres no good way forward. He highlighted the pervasive uncertainty, with businesses anticipating an unclear future in the trade landscape.

This intensifying tariff war comes more than two decades after China joined the World Trade Organizationan event facilitated by the United Statesthat triggered a remarkable economic transformation for China, characterized by increased foreign investments and a surge in exports to the U.S. Last year, China-U.S. trade was valued at $582 billion, but a widening trade imbalance has reignited tensions, leading to the current trade skirmishes that began during Trumps first term.

While the trade deficit has shown some signs of narrowing, it remains persistently high. Concurrently, concerns have escalated within the U.S. and other Western markets regarding the influx of Chinese products, particularly in emerging sectors like electric vehicles.

During his presidency, Joe Biden emphasized a strategy of de-risking rather than fully decoupling the U.S. from China. His administration adopted a more targeted approach, erecting barriers in sensitive sectors that carry national security implications, such as advanced technology and artificial intelligence.

In a marked shift, Trump has declared universal tariffs on all Chinese goods but has signaled a willingness to negotiate. However, it remains ambiguous what specific goals he aims to achieve through these negotiations. What are they looking for in those negotiations? questioned Greta Peisch, who previously served as the general counsel for the U.S. Trade Representative. How much is it possible to reduce these tariffs? These questions highlight the fog surrounding future U.S.-China trade relations.

Chinas leaders have made their stance clear: they will engage in discussions only if the U.S. halts its maximum pressure tactics. Lin Jian, a spokesperson for the Chinese Foreign Ministry, criticized the U.S. for its capricious and destructive behavior. Meanwhile, Li Cheng, a political science professor at the University of Hong Kong, expressed concerns that Trumps fluctuating policies might confuse the Chinese leadership, leading to skepticism about any negotiations.

With no immediate dialogue on the horizon, businesses are actively weighing their options. Lisa Li, who is involved in sales for an athletic wear manufacturer in Hebei, noted that her company is in discussions with clients about sharing the burden of increased costs. While its premature to determine if they will retreat from the U.S. market, she hinted at plans to expand into markets like Australia and Europe.

Conversely, in the manufacturing hub of Wenzhou, a maker of holiday lights expressed a more pessimistic outlook. Bo, who requested anonymity due to fears of retaliation, revealed that he might have to only give up if tariff hikes become permanent, especially since European markets have been sluggish. In Hong Kong, Danny Lau, who oversees an aluminum-coating factory, shared that while one of his U.S. clients continues to work with him, uncertainty looms over future contracts due to the unfavorable tariff environment.

Reports from Shanghai indicate a drastic decline in shipping traffic to the U.S., with major shipping lines slashing their trans-Pacific routes following the implementation of Trumps tariff. This decline highlights the immediate ramifications of the ongoing tariff war.

In the long term, this escalating tariff conflict may push Chinese companies to diversify their supply chains and even relocate parts of their manufacturing operations out of China, with some potentially looking to establish bases within the U.S. Hu, the consultant, noted that businesses might follow the example of a Tianjin steelmaking company that ceased trading with the U.S. due to the escalating tariffs. The best plan is to not come into contact, advised David Yu, who works in foreign sales for the Tianjin firm.

Despite the grim outlook, Zou maintains a glimmer of hope for the U.S. market, describing it as reliable and without finicky demands. Its the best market on Earth, he asserted, optimistically stating, I am waiting for the rainbow after the storm.

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Wu reported from Bangkok and Tang from Washington. AP researcher Shihuan Chen in Beijing and writer Kanis Leung in Hong Kong contributed to this report.