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Trump’s trade war escalates as China retaliates with 34% tariffs
The Chinese government said it would match President Trump’s tariff, and also barred a group of American companies from doing business in China.
China has struck back at President Donald Trump.
On Friday in Beijing, in a rapid fire series of policy announcements including 34% across-the-board tariffs, China showed that it has no intention of backing down in the trade war that Trump began this week with his own steep tariffs on imports from around the world.
China’s Finance Ministry said it will match Trump’s plan for 34% tariffs on goods from China with its own 34% tariff on imports from the United States.
Separately, China’s Ministry of Commerce said it was adding 11 American companies to its list of “unreliable entities,” essentially barring them from doing business in China or with Chinese companies. The ministry imposed a licensing system to restrict exports of seven rare earth elements that are mined and processed almost exclusively in China and are used in everything from electric cars to smart bombs.
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The commerce ministry also announced it was beginning two trade investigations into American exports of medical imaging equipment — one of the few manufacturing categories in which the United States remains internationally competitive.
China’s General Administration of Customs said that it would halt chicken imports from five of the biggest U.S. exporters of agricultural commodities and sorghum imports from a sixth company.
And China’s State Administration for Market Regulation announced that it suspected the China division of Dupont, the American chemicals giant, had violated China’s antimonopoly law and would investigate. Dupont had no immediate comment.
China’s new 34% tariffs, which are in addition to previously imposed tariffs, will hit fewer goods than Trump’s tariffs only because China sells far more to the United States than it buys. China bought $147.8 billion worth of American semiconductors, fossil fuels, agricultural goods and other products last year. It sold $426.9 billion worth of smartphones, furniture, toys and many other products to the United States.
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China is America’s second-largest source of imports, after Mexico, and third-largest export market, after Canada and Mexico.
But while Trump’s tariffs exempted some large categories of imports, like semiconductors and pharmaceuticals, the Chinese tariffs have no exemptions.
Beijing’s actions triggered a sharp decline in futures markets for American shares, in an indication that Wall Street may open sharply lower after posting Thursday its worst single-day result since 2020.
China’s Finance Ministry issued a statement strongly criticizing Trump’s tariffs, which were to begin to take effect Saturday and fully kick in Wednesday. “This practice of the U.S. is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,” the ministry said.
The Chinese tariffs were scheduled to take effect next Thursday — 12 hours after the U.S. tariffs take effect.
Jude Blanchette, director of the RAND China Research Center, said China’s forceful response was “inevitable” after Trump introduced his sweeping tariffs.
“Beijing can no longer maintain the fiction that diplomatic engagement with the Trump administration will prevent a full-scale trade war,” Blanchette said. “Despite White House warnings against retaliation, the total tariffs imposed on China are now so substantial that Beijing has little reason to exercise restraint.”
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The escalatory cycle also further dims hope of any summit soon between Trump and China’s top leader, Xi Jinping. Xi’s aides have been wary of scheduling any meeting between the two men unless a detailed agenda and resolution of pending issues can be worked out in advance.
Friday’s countermeasures highlight the retaliatory toolbox at China’s disposal, one reason Beijing feels it is better prepared to weather a trade war with the United States today than it was during the first Trump administration, said Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University.
“If the Trump administration’s hope is to pressure China to cave in, then it’ll be a nonstarter,” he said.
Wang said Beijing is also betting that Trump will come under growing pressure at home to ease some of his tariffs because of the harm it might do to the U.S. economy.
“China is in a better position to win this round of trade frictions,” Wang said.
Trump has contended that steep tariffs are essential to halt a long decline in the U.S. share of global manufacturing, by protecting the American market from a flood of imports. The White House has also said that the tariffs are needed to preserve the remaining industrial capacity of the United States to make munitions in case of military conflicts.
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China’s ambitious “Made in China 2025” industrial policy, which began in 2015, has made the country largely self-reliant in the production of many industrial goods, from electric cars to solar panels. While Chinese officials were caught off guard by Trump’s trade actions in 2018 and 2019 and sometimes took a few days to respond, they have moved much faster this year.
They acted Friday, 36 hours after the announcement of his latest tariffs, even though it was a national holiday.
But the Chinese economy depends heavily on exports, which is why Trump’s tariffs have caused alarm in Beijing and across the country. China’s trade surplus last year in manufactured goods — the amount by which exports exceeded imports — was equal to a tenth of the entire economy and rising.
Chinese officials said this week that if tariffs restrict their access to the U.S. market, they will shift exports to other markets. But China already runs large and widening surpluses with most of Europe and the developing world, triggering a wave of tariffs by countries elsewhere on Chinese goods.
China has been more cautious about responding to those tariffs, as it has tried to portray Washington as leading a global shift toward protectionism.
Trump also imposed steep tariffs this week on imports from dozens of other countries. Many of these countries rely on running large trade surpluses with the United States to pay for their big trade deficits with China.
Some of these countries — including Vietnam, Cambodia, Malaysia and Mexico — buy enormous quantities of components from China for assembly into finished goods for sale to the United States, with little or no tariffs paid. If the new U.S. tariffs stay in effect, China’s exports to these countries could also wither.
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China’s new export licensing system for rare earth metals may trigger further difficulties for American industry, and possibly for companies in Europe and elsewhere as well. Previous introductions of export licenses for other minerals have resulted in months of delays as civil servants and companies figure out the new rules.
China imposed a two-month freeze on shipments of rare earths to Japan in 2010 during a territorial dispute.
The Obama administration responded by calling for the United States to restart its own mining and processing of rare earths, which mostly shut down in the 1990s. But 15 years after the Japan embargo, mining has resumed in the United States but most of the ore is shipped to China for processing into valuable materials, as rare earths refining has proved technically challenging.
This article originally appeared in The New York Times.
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