China said Friday that it will impose an additional 34 percent tariff on U.S. goods, matching this week’s hike in levies targeting China by President Donald Trump that Beijing called “inconsistent with international trade rules.”
The development signaled more pain on Wall Street, where the Dow Jones Industrial Average slumped more than 2 percent, roughly 1,000 points, at the opening bell. The S&P 500 and tech-heavy Nasdaq also shed well over 2 percent.
China’s State Council, the country’s Cabinet, announced the change, effective Thursday, in a statement in which it condemned the “unilateral bullying” by the United States that had “seriously damaged China’s legitimate rights and interests.”
The new duties came along with a slew of nontariff measures Friday, reflecting Beijing’s playbook of using a suite of pressure points that amount to what it considers a tit-for-tat response.
Though it imported nearly $144 billion in U.S. goods last year, China exports far more to the United States than it imports, leaving Beijing unable to match Trump’s tariffs dollar for dollar. Still, China has made it clear that it can use other tools to make up the difference.
A long list of additional measures announced by the Chinese government Friday included export controls on rare earth metals needed to make high-tech products, the suspension of export licenses for 16 U.S. firms and the adding of 11 companies to an “unreliable entities list.”
Beijing also launched an anti-monopoly probe targeting the U.S. chemical giant DuPont Group, as well as an antidumping investigation into a type of medical X-ray tube imported from the United States and India.
Unlike Trump’s first term, China has taken a more proactive approach in the current round of trade tensions where “every U.S. action garners a swift and substantive reaction,” said Joe Mazur, senior analyst at Trivium China, a consultancy.
This time, Beijing tries “not to strike first but always strikes back,” Mazur said.
China’s measures came as stock markets in Asia and Europe fell sharply Friday, continuing the steep declines recorded in the United States, amid fears of a full-blown global trade war and an economic recession sparked by Trump’s tariff blitz.
The 10-year Treasury yield fell as investors fled to bonds for safety.
Crude oil fell 7 percent to roughly $62 per barrel as commodities markets reacted to the possibility of slower economic growth. “To state the obvious, the highest U.S. tariffs in more than 100 years, plus retaliation, will have the effect of slowing the economy around the world, and that is fundamentally a headwind for oil demand,” said Raymond James analyst Pavel Molchanov.
China, one of the hardest hit by this week’s tariffs, had vowed to take “firm countermeasures” to retaliate. Analysts said the escalation hurts the chances of negotiations between Washington and Beijing.
“The two sides are likely not done hitting each other,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “Given the U.S.’s threat to punish those who retaliate, we can anticipate that the U.S. may double its tariffs on China (to the full 67 percent level), in which case China would as well.”
Chinese experts had warned that Beijing would not back down.
“If China wants to strike hard, it will strike hard,” Wang Yiwei, director of the Institute of International Affairs at Renmin University in Beijing, said before China announced its retaliatory measures.
“Trump’s policy is to scare people first. If you are afraid, you will beg for mercy. … From China’s perspective, this is blackmail, and China is different from America’s allies. It is relatively independent and will not be fooled by America,” he said.
Other regional leaders seized on Trump’s suggestion that he might be open to cutting deals, despite his previous insistence that he was not interested in discussing exemptions to his tariffs.
Amid the ongoing uncertainty, shares in Australia, Japan and South Korea traded lower on Friday.
Japanese shares were on track to record their steepest weekly decline in five years, with the Nikkei index down 3.6 percent in early afternoon trading. Automakers including Toyota and Honda were particularly badly hit after Trump introduced a 25 percent tariff on all foreign-made cars and car parts.
Prime Minister Shigeru Ishiba said Friday the tariffs amounted to a “national crisis” and called on ministers to “closely study the tariffs” and take measures to lessen their impact on the Japanese economy.
Australia’s ASX 200 closed 2.3 percent lower Friday, and South Korea’s KOSPI was trading down 1.6 percent, although this was also due to upheaval over the president’s removal from office. Trading in China and Hong Kong was closed on Friday for the Tomb Sweeping Day holiday.
In the United States on Thursday, stocks closed down sharply, with the S&P 500 notching its biggest one-day drop since summer of 2020.
On a day he branded “Liberation Day,” Trump on Wednesday announced tariffs on imports from almost every country in the world.
These included a new tariff of 34 percent on Chinese goods, on top of the 20 percent levy imposed in February as Trump accused Beijing of not doing enough to stop the flow of fentanyl and its precursors into the United States. It is also in addition to existing tariffs on goods including some appliances, machinery and clothing that were already as high as 45 percent after Trump’s first round of tariffs.
In this week’s tariff announcement, Trump also slapped duties of 24 and 25 percent on Japan and South Korea, respectively — both key U.S. security allies and major trading partners — and 32 percent on Taiwan, although he exempted its advanced semiconductors from the levies.
And Trump targeted many of the countries that had benefited from companies’ efforts to diversify supply chains away from China: Cambodia was stung with a 49 percent tariff, Vietnam with 46 percent, and Thailand, 36 percent.
American businessman Michael Laskau said if the proposed tariffs are imposed, the impact on his garment business in Vietnam would be dramatic. “No one works on those types of margins,” he said. “If we were to assume the 46 percent, for us, it would be a huge, huge loss, as it would be for anybody in the supply chain.”
The prospect that the trade war could get worse has rattled many across the region.
“We can see that some countries are already announcing retaliatory tariffs and if these tit-for-tat tariff measures continue, it may escalate into a situation where you may end up with a global trade war,” Gan Kim Yong, Singapore’s deputy prime minister, told reporters late Thursday.
Singapore — which was hit with the lowest tariff rate, 10 percent — was not yet retaliating, he said.
Other economies in Asia held out hope that they would be able to win exemptions through negotiations.
Taiwanese President Lai Ching-te said he was looking forward to “working closely with the U.S. to ensure a fair, mutually beneficial approach that strengthens our shared prosperity.”
A delegation of Vietnamese officials led by Deputy Prime Minister Ho Duc Phoc is set to visit Washington this weekend in the hope of negotiating better terms, according to Vietnamese state media.
Despite repeatedly ruling out negotiations, Trump told reporters after U.S. markets closed down sharply Thursday that he would be open to striking deals with individual countries.
“Every country is calling us. That’s the beauty of what we do,” Trump told reporters on Air Force One on Thursday night. “We put ourselves in the driver’s seat. If we would have asked these countries to do us a favor, they would have said no. Now they will do anything for us.”
Tan reported from Singapore. Lyric Li in Seoul contributed to this report.
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