Trade War Heats Up, China Retaliates Against Trump's Tariffs

BEIJING, TUESDAY - China retaliated against the tariffs imposed by United States President Donald Trump by setting tariffs of 10 percent and 15 percent on products from the US. Products subject to the 15 percent tariff include coal and liquefied natural gas products. Meanwhile, the 10 percent tariff is applied to crude oil, agricultural machinery, and large-engine cars.

China's tariffs will take effect on February 10, 2025. Not only that, China will investigate US technology company Google, owned by Alphabet.Inc for violating anti-monopoly laws.

The announcement of China's tariffs was issued on Tuesday (4/2/2025), a few minutes after the additional 10 percent tariff on Chinese products imposed by Trump came into effect. Despite retaliating against the US tariffs, China remains willing to negotiate.

The Chinese Ministry of Commerce stated that the control is to safeguard national security interests. "The unilateral tariff increase by the US violates World Trade Organization rules. It will damage China-US economic and trade cooperation," said a statement from the Chinese Ministry of Finance.

China dominates the production or refining of metals that can be used to make solar panels, atomic research, and armor-piercing bullets. The US halted tungsten mining in 2015 and has not produced refined bismuth since 1997.

In the near future, around the end of this week, Trump plans to speak with Chinese President Xi Jinping. The US has imposed additional tariffs after Trump repeatedly warned China. Trump believes that China has not yet been able to completely stop the flow of illegal drugs into the US. China considers illegal drugs like fentanyl to be an American problem.

“China is expected to stop sending fentanyl to the United States. If they don’t, the tariffs will go much higher,” Trump said Monday.

The US also imposed tariffs on products from Canada and Mexico, which were planned to take effect on Tuesday. However, at the last minute, on Monday (3/2/2025), Trump agreed to suspend the tariff increase for Mexico and Canada for the next 30 days. This decision was made after Mexico and Canada were said to be willing to enforce immigration rules at their borders with the US.

In addition to tariffs, China announced export controls on several rare earth metals and metals that are essential for high-tech devices and clean energy transition. These elements include tungsten, tellurium, bismuth, molybdenum, and indium.

Many of these elements have been designated as critical minerals by the US Geological Survey. These minerals are important for the economic or national security of the US. Export controls are an addition to the restrictions already imposed by China in December 2024 on critical elements such as gallium.

The Chinese Ministry of Commerce has placed two US companies on the list of unreliable entities. These two companies are PVH Group (owner of the Calvin Klein and Tommy Hilfiger brands) and the biotechnology company Illumina, which has offices in China.

Companies on the list are prohibited from engaging in any China-related import or export activities and from making new investments in China. In September 2024, China was investigating PVH over a boycott of cotton from the Xinjiang region.

During his first term in 2018, Trump started a trade war with China over its massive trade surplus. China retaliated by imposing tariffs on hundreds of billions of dollars worth of goods. As a result, global supply chains were disrupted and the world economy suffered.

“The trade war is still in its early stages so the likelihood of further tariffs is high,” Oxford Economics said in a note on China’s economic growth forecast.

The US is a source of crude oil for China but a relatively small one, accounting for about 1.7 percent of its total imports of $6 billion last year. More than 5 percent of US liquefied natural gas imports come from China. After China retaliated against Trump's tariffs, crude prices fell further by 2 percent. The US dollar strengthened while the Chinese yuan, euro, Australian dollar, Canadian dollar and Mexican peso weakened.

This reflects market concerns about the risk of a protracted global trade war. “Unlike Canada and Mexico, it is clearly more difficult for the US and China to agree on what Trump is demanding economically and politically. The market’s previous optimism about a quick deal is still uncertain,” said Gary Ng, senior economist at Natixis in Hong Kong.

Trade between China and the US is huge, totaling more than US$530 billion by 2024. China's sales of goods to the US during the same period reached more than US$400 billion, second only to Mexico.

China is a major supplier of goods ranging from electronics and electrical machinery to textiles and clothing, according to the Peterson Institute of International Economics. But its wide trade imbalance - estimated at $270.4 billion by 2024 - has long troubled the US.

The US is also concerned about China's heavy support for US industries and the poor treatment of US companies operating in China. China's economy relies heavily on exports to drive growth despite efforts to boost domestic consumption.

When Trump first came to power in 2017, he vowed revenge against China and started a trade war by imposing significant tariffs on hundreds of billions of dollars worth of Chinese goods.

China responded and retaliated with tariffs on US products that particularly affected US farmers. The main US demands were greater access to the Chinese market, broad reforms of business sectors that favor Chinese companies, and an easing of China's tight state controls.

After a long and tense negotiation process, the two sides agreed to a “phase one” trade deal, marking a truce in the nearly two-year trade war.

China was willing to import $200 billion worth of US goods, including $32 billion in agricultural products and seafood. However, due to the Covid-19 pandemic, China is considered to have failed to fulfill that commitment. In the end, China only bought 58 percent of the US exports it had promised to buy under the bilateral agreement.

Former US President Joe Biden took a more targeted approach to tariff increases. Under Biden, the US expanded efforts to curb advanced chip exports to China. This was an effort to prevent US technology from being used in Chinese military weapons.

Biden also used tariffs to target “excess Chinese industrial capacity.” The U.S. is concerned that Chinese industrial subsidies for green energy, cars and batteries could flood global markets with cheap goods.

Biden then imposed tariffs on $18 billion worth of Chinese imports in May 2024. Biden accused China of “cheating” instead of competing. Based on the tariff increases at that time, tariffs on electric vehicles quadrupled to 100 percent. While tariffs on semiconductors jumped from 25 percent to 50 percent. (REUTERS/AFP/AP)