I don't post anything on Tiktok so I don't know if the tags work exactly the same but the tags in Xiaohongshu should work just like regular hashtags on a piece of content. It makes it easier for people utilizing the search function of the app to look up content with the same or similar tags.
If you're posting on Xiaohongshu and your content appeals more to Chinese users, then posting tags in Chinese makes more sense than in English.
If you say your engagement is better when you use English tags, then it's possible that your content actually appealed more to people hitting up the search function in English rather than in Chinese.
Or you can just do both: Tags in both English and Chinese. I've only ever done tags in Chinese but I guess you can also have tags in both languages.
Titles and descriptions are important because the search function of the app takes those into account too.
Like for instance, if I'm looking up specifically makeup stores in Hangzhou for instance, the search function will look for the keywords of makeup and Hangzhou in your title, description and tags. If you're posting about a makeup salon in Hangzhou but you avoided writing those keywords in your title, description and tags, then your post either won't appear in the search results at all or your post will be far, far, behind in the search results.
Check out this English language YouTube playlist designed to explain to best to use Xiaohongshu: https://www.youtube.com/playlist?list=PLd1DjhZfvC7ZSaZVeeu8cut3Ksw1U9aoM