China unveiled a series of retaliatory measures against the U.S. on Tuesday, shortly after U.S. tariffs on Chinese goods took effect, raising concerns of a broader trade war between the world’s two largest economies.
China’s Finance Ministry said Tuesday it will impose additional tariffs of 15% on coal and liquefied natural gas imports from the U.S. and 10% higher duties on American crude oil, agricultural machinery and certain cars, starting Feb. 10.
China reiterated that the imposition of additional levies of 10% by the U.S. “seriously violates the rules of the World Trade Organization … destructs the normal bilateral economic and trade activities” according to a CNBC translation of the statement in Chinese.
In a separate statement Tuesday, Chinese Commerce Ministry and customs officials announced to impose export controls on a range of items and technologies related to certain critical minerals, including tungsten, tellurium, ruthenium, molybdenum and ruthenium.
China’s tariff announcement is more of a “symbolic move for now,” said Louise Loo, China lead economist at Oxford Economics, who estimates the additional duties could raise the effective tariff rate on U.S. imports into China by close to 2 percentage points.
Loo, however, cautioned that a second U.S.-China trade war was “clearly in the early stage” and sees “a very high likelihood” of further rounds of tariffs from the two countries.
Chinese offshore yuan was little changed against the U.S. dollar, following the announcements. The mainland’s markets, which have remained closed due to the weeklong Lunar New Year holiday, will resume trading Wednesday.
China’s State Administration of Market Regulation also said it has decided to initiate an investigation into Alphabet
’s Google as the American technology giant was suspected of violating the country’s anti-monopoly law.
Google pulled its internet and search engine services in China in 2010, but still has some operations focused on Chinese businesses looking to advertise on Google platforms abroad.
“These moves are warnings that China intends to harm US interests if need be but still give China the option to back down,” Julian Evans-Pritchard, head of China economics at Capital Economics, said in a note.
Pritchard acknowledged that the tariffs proposed by China could be postponed or canceled before they come into effect next Monday, and the Google investigation could end without any penalties.
U.S. President Donald Trump on Monday agreed to a 30-day pause on the implementation of the planned 25% tariffs on imports from Canada and Mexico, as the two countries agreed to take steps to prevent the illicit drug trafficking of fentanyl into the U.S.
China, however, did not get any such reprieve.
“The overarching geo-economic dimensions to U.S.-China trade means that resolution will be far more fraught than is the case with Mexico and Canada,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank.
Swift retaliation
As Trump started his second term, he ordered his administration to investigate Beijing’s compliance with a trade deal struck during his first presidency in 2020. The final result of the assessment will be delivered to Trump by April 1, potentially setting the stage for further tariff actions, economists said.
White House press secretary Karoline Leavitt reportedly said Monday that Trump and Chinese president Xi Jinping could talk “in the next couple of days.”
Trump on Saturday signed an order imposing the long-threatened 10% tariffs against China on top of the existing tariffs of up to 25% on Chinese goods levied during his first presidency.
The additional duties would reduce China’s real gross domestic product growth by 50 basis points this year, economists at Goldman Sachs said in a report Monday, reinforcing calls for stronger domestic stimulus measures to offset impacts from the rising tariffs.
The investment bank expects China’s real GDP growth to slow to 4.5% this year and domestic consumer inflation to rise just 0.4% due to weak demand and a prolonged real estate crisis.
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