Since the US imports more from China than China from the US, Trump has been excited to level more and more tariffs on Chinese goods claiming that eventually, China would not be able to retaliate. It turns out that global trade has many dimensions. China can retaliate not only via tariffs on trade but restrictions on FDI or simply by depreciating its exchange rate: TB($) = X [$, Chinese tariffs] – M[E, US tariffs]. As tariffs increase China does not have to increase its tariffs on US goods, it can simply depreciate its currency, as it did today.