China Tariffs on the USA: A New Trade War Escalation?
China Tariffs on the USA
The trade war between the world’s two largest economies rolled to another low. Reacting to the new U.S. tariffs on imports from China, China announced a fresh wave of retaliatory tariffs on key American exports: coal, liquefied natural gas (LNG), crude oil, and automobiles. Moreover, China has initiated a probe against Google and has imposed export controls on critical metals.
As tensions escalate, many wonder if this is the commencement of renewed prolonged war. Will the two nations reach a compromise. i.e., any common ground, or will the world economy brace for yet more problems?
Key China Tariffs on the USA
Starting February 10, China will impose additional retaliatory tariffs against the U.S., including:
- 15% tariffs on:
- U.S. coal
- Liquefied natural gas (LNG)
- 10% tariffs on:
- Crude oil
- Agricultural machinery
- Large-displacement automobiles and pickup trucks
- Electric trucks (which would also launch a challenge against the sales of Tesla’s Cybertruck in China)
China’s Export Controls on Critical Metals
In addition to the tariffs, it is also slated to impose export constraints on other metals—tungsten and rare earth metals—crucial for electronics, military parts and applications, and solar panels, among other uses. It could hinder the ability of U.S. tech and defense companies strongly dependent on mineral exports from China.
China’s Duty Imposition on the USA
The retaliatory measures imposed were in response to the U.S. tariffs enforced by President Donald Trump, who raised a 10% levy on all Chinese imports of $450 billion. The U.S. maintains the tariffs are necessary to counter unfair trade practices, shrink America’s trade deficit, and stave off fentanyl from coming into the country.
According to China, these actions violate World Trade Organization (WTO) rules, which would further enable the two nations to disengage from economic cooperation.
Read This Also: U.S. Imposes Tariffs on Canada and Mexico: Trade War Intensifies Amid Economic Uncertainty
Trade War: A Game of Strategic Chess by China?
Unlike any previous trade war, this seems a more tactical and proportioned response on the part of China. Rather than enacting tariffs on the U.S. at the same level dollar-for-dollar, it is trying to go for those sectors where the quantum of U.S. exports to China at present is limited.
For example:
- The U.S. is just 1.7% of China’s crude oil imports, so the new tariff is not much of a blow to happiness to Chinese energy security.
- LNG total U.S. exports to China are only 5% of the total Chinese imports; thus, the tariffs will damage China much less while putting strong pressure on Washington.
Negotiations Postponed
China delayed putting tariffs into action until February 10 so that the Chinese President Xi Jinping can bargain at the last minute with Donald Trump. It mirrors the argument of Mexico and Canada, where Trump forfeited their tariffs for better border security efforts.
Besides Tariffs: Antitrust Probe into Google
In the latest twist of the conflict, an antitrust probe regarding Google has been launched by China’s State Administration for Market Regulation. Though there seems to be little direct connection between the tariffs up against the investigation, it signals that China is prepared to retaliate beyond standard trade measures.
Already a light player in China due to stringent censorship laws, Google now faces further probing that could turn its business dealings with Chinese smartphone manufacturers sour.
The global economic impact of China tariffs on the USA
The tariff war is not just bilateral; it carries some global ramifications:
- Inflation shoots up: Higher tariffs will result in higher import costs for American goods, passing over the higher prices to American consumers.
- Disruption in the supply chain: Companies relying on U.S.-China trade can face scarcities, delays, or additional costs.
- More volatility in the stock market: Investors are carefully watching trade developments, with turmoil in stock prices at the slightest alteration in trade policies.
- Strained EU Relations: Trump is making more aggressive indications to the EU; he may potentially impose tariffs on EU goods, escalating tensions further.
Read This Also: Trump Halts Tariff on Mexico and Canada for 30 Days Amid Border Security Talks
Are There New Developments in the U.S.-China Negotiations?
Despite growing tensions, both countries have left the door open for negotiations. Investors are particularly looking for any signs of convergence during the discussions between Trump and Xi Jinping.
The relatively modest nature of the Chinese tariffs signals that Beijing wants a diplomatic solution rather than more economic conflict.
However, if these negotiations fail, there is a danger of heightened tariffs, which might just sink the global economy all the more.
Conclusion: What Lies Ahead for the China Tariffs on the USA?
All eyes are on whether the U.S. and China go for negotiations or up the ante on the trade war, what with the February 10 tariff deadline approaching.
With the two economies heavily enmeshed, a continuation of trade tensions presents an extremely long-term threat to global supply chains, inflation, and market stability.
For now, the trade war remains untasted, but China has played its hand cautiously enough to suggest that this battle is far from over. The ensuing weeks may prove pivotal to the future course of U.S.-China economic relations.
References:
https://www.nbcnews.com/news/china-us-tariffs-elon-musk-doge-morning-rundown-rcna190552
https://apnews.com/article/china-tariffs-us-trump-150fab3a44ec055845e47c82bde544c2
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