In announcing new retaliatory tariffs today, China claimed that its response to Donald Trump’s latest escalation is “rational [and] restrained.” That may be a function of reality more than policy, although it’s most likely a combination of the two. The moves would add graduated tariffs to $60 billion in American imports into China, a blow to US producers but not as harsh as the $200 billion escalation from Trump that prompted it:

China will impose differentiated tariffs on $60 billion in U.S. goods if the United States presses ahead with its latest trade threats, Beijing warned Friday.

In a statement, the Commerce Ministry said the tariffs would be at rates of 5, 10, 20 and 25 percent.

If it’s rational and restrained, it’s because China has just about reached the functional limits for a trade war against the US. Two weeks ago, Trump threatened to go far beyond the added $200 billion in potential penalized imports, saying he might slap tariffs on the entire $500 billion in imports from China. Beijing only has the ability to penalize $129 billion, largely because of the trade restrictions that Trump wants ended.

The list of tariffs suggests that China has had to play its strongest cards in this round already, too:

“The U.S. side has repeatedly escalated the situation against the interests of both enterprises and consumers,” the Chinese Commerce Ministry said in its statement. “China has to take necessary countermeasures to defend its dignity and the interests of its people.”

Among U.S. products targeted were a wide range of agricultural and energy products such as beef and LNG. LNG’s inclusion marks a deployment by Beijing of one of its last major weapons from its energy and commodities arsenal in its fight with Washington.

The market is not large by value compared with the around $12 billion per year of U.S. crude that arrives in the country, but those levels could shoot up as Beijing forges ahead with its plan to switch millions of households to the fuel away from coal as part of its battle against smog.

That’s not to say that China doesn’t have other options. They can heighten regulatory harassment of American companies doing business in China, which will impose indirect costs on consumers as well as workers, but much of that will hit China, too. It might make US companies less enthusiastic about doing business in China in the long run, which would present Beijing with fewer opportunities to earn money and access technology for their own purposes.

Globally, Xi Jinping has a few more options, none of them promising. China could also escalate pressure in the Pacific Rim to muscle the US out of trade, which the TPP treaty might have defended against, but that would be an ambitious and fraught effort for Beijing. They could also dump US Treasuries and disrupt US borrowing power, but Russia tried that this week, and it barely caused a blip in our market interest rate.

Failing that, Xi holds one last card: North Korea. If Trump wants the big W on that standoff, he needs Xi to keep economic pressure on Kim Jong-un. Xi could threaten to loosen or completely end sanctions, letting Kim off the hook. However, that might increase the potential for military action exponentially, too, leading to a much bigger mess than a momentary trade war.

Larry Kudlow warned China not to underestimate their trade-war opponent:

.@larry_kudlow: "The Chinese had better not underestimate the determination of President Trump to follow through and seek zero tariffs and non-tariff barriers." pic.twitter.com/QZmAOYvU58

— FOX Business (@FoxBusiness) August 3, 2018

This new bid from China might indicate that they’re not underestimating him at all, but could be calculated as a signal to Trump that they’re ready to negotiate. They didn’t go all-in this round, or match Trump’s latest threat dollar for dollar. Their statement about being “rational” and “restrained” seems calculated to encourage a more temperate response. China won’t surrender publicly, of course, but they probably want to get this resolved before the US adjusts to the tariff wars and absorbs its economic impact. If that happens, it might be a long time before Xi has enough leverage to cut a deal on his terms at all.