The U.S.-China trade war is escalating. But China may have more leverage than the U.S. thought

As the trade war between the U.S. and China escalates, the biggest questions are which side has more leverage and which is willing to tolerate more pain.

China exported more than $400 billion US to the United States last year, much more than American companies sold to China. That's why the Trump administration claims it has all the leverage.

"The ball is in China's court. China needs to make a deal with us. We don't have to make a deal with them," said White House press secretary Karoline Leavitt on Tuesday.

"China wants what we have; every country wants what we have: the American consumer. Or to put it another way, they need our money," she told reporters in Washington.

But the trade landscape is more complicated than that. And experts say China believes it can both inflict more damage on the U.S. and tolerate more pain from a tariff war.

"China does have a lot of cards to play. It has a lot of leverage," said Jia Wang, a senior fellow at the China Institute at the University of Alberta.

Modern U.S.-China trade is dominated by tech products and electronics, everything from iPhones to computers to batteries.

But Wang says there are enormous exports of crucial industrial inputs that will be very difficult for the U.S. to replace because China controls much of the world's production. For example, in a retaliatory measure, it banned exports of certain critical minerals earlier this month.

The ban covers seven rare earth elements and magnets used in defence, energy and automotive technologies.

"That's really going to hurt U.S. industries, and very few countries can really fill that gap," she said. "There's just not enough time for other suppliers to quickly come to the market and to supply the amount needed by the U.S … so it's a very powerful card China can play."

Wang also pointed to the fact that China is America's second-largest foreign creditor, holding about $760 billion US in Treasury securities as of January.

Unlike the trade war in 2018 when China quickly sought to negotiate a break in tariffs, this time, Beijing is taking a more aggressive approach.

"If the U.S. really wants to resolve the issue through dialogue and negotiation, it should stop exerting extreme pressure, stop threatening and blackmailing, and talk to China on the basis of equality, respect and mutual benefit," Foreign Ministry spokesperson Lin Jian said at a briefing.

Meanwhile, Chinese President Xi Jinping is touring Southeast Asian countries to ramp up economic ties and pitch China as a more reliable partner than the U.S.