(WASHINGTON) — President Donald Trump earlier this month announced far-reaching “reciprocal tariffs” on scores of countries, but he soon suspended the levies on all but one: China.

Instead, Trump ratcheted up China tariffs to a whopping total of 145%. In response, China slapped 125% tariffs on U.S. goods and issued other countermeasures.

The trade war between the world’s two largest economies amounts to a battle of wills in which each stands poised to draw on economic advantages and political pressure points, analysts said. An assessment of each side’s leverage, they added, helps reveal how the standoff may unfold.

“The stakes are extremely high and the only issue remaining is who is going to blink first,” Yasheng Huang, professor of global economics and management at MIT, told ABC News.

Potential economic damage

The U.S. and China each are among the other’s top trade partners, meaning a sizable chunk of each economy depends on the relationship.

U.S. consumers and firms purchase more goods and services from China than the other way around, putting China at risk of a larger loss in economic activity if trading comes to an effective halt, analysts said.

Still, they added, the trade imbalance also threatens acute product shortages and price increases for U.S. consumers.

“The U.S. imports more from China than it exports to China — that gives the U.S. an advantage,” Shang-Jin Wei, a professor of finance and economics at Columbia University who studies the U.S.-China trade relationship, told ABC News.

“But the very fact that the U.S. buys so much from them also means that it is dependent on their supply of low-cost goods,” Wei said.

Last year, the U.S. imported about $438 billion worth of goods and services from China, making it the largest destination for China’s exports. In all, that figure accounts for about 15% of China’s exports, according to the U.S. Trade Representative. China makes up a primary source of consumer electronics like laptops and smartphones, as well as footwear, apparel and toys.

U.S. tariffs are expected to lower China’s gross domestic product growth this year by 0.7%, though the Chinese economy is still forecast to expand by more than 4%, J.P.Morgan said on Tuesday.

The loss of relatively cheap Chinese goods, meanwhile, is expected to raise prices for U.S. shoppers. Over the weekend, the Trump administration issued a tariff exemption for some consumer electronics from China, but price hikes are expected for a host of other goods.

On the other hand, China purchased about $143 billion of U.S. goods last year, including crops such as soybeans and wheat, as well as oil and gas.

Roughly 930,000 U.S. jobs are supported by exports to China, the U.S.-China Business Council said in a report last year. During Trump’s first term, the U.S. provided financial relief to some farmers to make up for lost sales to China.

Essential materials

The U.S. or China could also derive leverage from specialized goods that would be difficult for the other country to replace in the event of trade restrictions.

Earlier this month, China imposed export restrictions on some rare earth elements and magnets that make up critical inputs in some U.S. auto, energy and defense products. For now, Chinese companies can still export to U.S. buyers, though the Chinese firms must receive approval from the Chinese government.

Rare earths are vital for a range of defense technologies, including F-35 fighter jets, Tomahawk missiles and radar systems, the Center for Strategic and International Studies, or CSIS, said on Tuesday.

The U.S. is not prepared to immediately make up for a potential loss of those components through domestic industry, CSIS found.

“The U.S. dependency on China for rare earths is extremely high,” Huang said. “China can shut it off or turn it on at will — that is leverage.”

Meg Rithmire, a professor of business administration at Harvard University, said the U.S. could seek out alternative sources abroad but China remains the dominant source of such materials.

“It doesn’t seem like this is the kind of thing that will cripple anyone in the short term, but the supply chains are such that it could get messy in the medium term,” Rithmire said.

Meanwhile, China relies on the U.S. for some important components of its electronics, auto and technology products, Huang said.

China could likely withstand a temporary shortfall, Huang added, though a long-term shortage of such goods would pose a problem.

“It would definitely hurt them — no question about it,” Huang said.

Tolerance for financial pain

Analysts told ABC News that China’s authoritarian form of government affords it greater capacity to tolerate a prolonged period of economic hardship.

By contrast, separate branches of government and regular elections in the U.S. make it more difficult for the country to hold out through potential widespread financial challenges, they added.

The Chinese public faces limits on public expression and little recourse for bringing its displeasure to bear on political representatives, analysts said.

“There’s a lot structurally built into the Chinese system to withstand political pain, which isn’t the case for the U.S.,” Rithmire said. “The U.S. system incorporates the unhappiness of people as they experience the economic effects.”

The countries’ different responses to COVID-19 exemplify how their respective political systems respond to flagging general welfare, analysts said.

China maintained a zero-COVID policy for several years, severely restricting individual mobility and hamstringing a broad swath of the nation’s economy. In the U.S., on the other hand, eight states never issued COVID lockdowns, while the federal government focused on economic stimulus and expedited vaccine development.

“The trade war, as substantial as it is, doesn’t compare to the COVID lockdown that China implemented,” Huang said. “We have solid evidence that the political system is quite immune from economic hardship.”

Still, that tolerance of economic pain has limits, Wei said. Over the past half century, the Chinese government has drawn legitimacy from its ability to deliver economic growth and improved living standards, he added.

“Anything that hurts that can undermine their power,” Wei said.

Ultimately, the standoff may endure until each country sees a pathway out of the trade spat that promises sufficient political benefit.

“Is there a productive off-ramp for each side?” Huang said.

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