After the United States imposed new tariffs on Chinese goods, the Ministry of Finance of the Chinese Communist Party quickly retaliated by imposing tariffs on some imports from the United States, reigniting the trade war between the two largest global economies.
This move comes as President Trump has temporarily suspended tariffs on Mexico and Canada. However, China did not receive any such easing measures.
Trump has repeatedly warned the Chinese Communist Party to strengthen efforts to combat the illegal flow of drugs into the United States. However, China has been slow to provide a response that satisfies the U.S. government. Starting at 00:01 Eastern Time on Tuesday, February 4th (equivalent to 13:01 Beijing Time), the United States officially imposed an additional 10% tariff on all Chinese imports.
Within minutes, the Ministry of Finance of the Chinese Communist Party announced that they would impose a 15% tariff on U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural equipment, and some cars.
The new tariffs on U.S. products imposed by the Chinese Communist Party will take effect from February 10th.
The Chinese Communist Party also announced that it is conducting an anti-monopoly investigation on Google, which is under Alphabet. Additionally, the parent company of clothing brands like Calvin Klein, Tommy Hilfiger, True & Co – PVH Corp, and the U.S. biotechnology company Illumina have been included in the “Unreliable Entity List”.
Furthermore, the Ministry of Commerce and General Administration of Customs of the Chinese Communist Party stated that, in order to “safeguard national security interests,” they will implement export controls on tungsten, tellurium, ruthenium, molybdenum, and related products.
On Monday, both Canada and Mexico made commitments regarding border enforcement, leading Trump to temporarily postpone imposing a 25% tariff on these two neighboring countries at the last minute.
However, there were no such easing measures for China. A White House spokesperson stated that Trump will speak with the Chinese Communist Party leader Xi Jinping later this week.
During his first term in 2018, Trump engaged in a two-year trade war with Beijing due to the significant trade deficit between the U.S. and China. This had a profound impact on the U.S., China, and the global economy, forcing many businesses to shift their production from China to Southeast Asia, India, Mexico, and other regions, resulting in a large-scale restructuring of supply chains.
The Oxford Economics Research Institute has lowered its growth forecast for the Chinese economy, stating that “the trade war is still in its early stages, and the likelihood of further tariff increases is high.”
Trump has warned that unless China stops the flow of deadly fentanyl into the United States, he may further increase tariffs on China. He stated on Monday, “I hope that China will stop shipping fentanyl to us, otherwise the tariffs will be significantly increased.”
China, on the other hand, argues that the fentanyl epidemic is a problem in the U.S. and has indicated that it will challenge Trump’s tariff policies at the World Trade Organization and take other retaliatory measures. Nevertheless, in order to avoid escalating conflicts, China has left the door open for negotiations with the U.S.
China has a lower reliance on U.S. crude oil, with American crude oil accounting for only 1.7% of China’s imports last year, approximately $6 billion. However, China’s demand for U.S. liquefied natural gas is increasing.
In 2019, the Chinese Communist Party imposed punitive tariffs on U.S. liquefied natural gas (LNG) in retaliation for Washington’s increased tariffs on Chinese goods. Now, the risks of doing so are apparently higher; China imported 4.16 million tons of American LNG in 2024, valued at $2.41 billion, nearly double the import volume in 2018.
After China’s retaliatory actions, the Hong Kong stock market saw a reduced increase, the U.S. dollar strengthened, and the Chinese yuan depreciated.
Gary Ng, a senior economist at Natixis, a French bank specializing in foreign trade, stated: “Unlike with Canada and Mexico, it appears to be more challenging for the U.S. and China to reach a consensus on Trump’s economic and political demands. The market’s optimism for a swift agreement seems uncertain.” He also mentioned, “Even if the two countries can reach consensus on some issues, tariffs are likely to be used repeatedly as a tool, which could be a major source of market volatility this year.”
Trump hinted that the European Union may be his next target for imposing tariffs, but did not specify a timeline.
EU leaders stated at an informal summit in Brussels on Monday that if the U.S. imposes tariffs, Europe will be prepared to retaliate but also called for rationality and negotiation.
The U.S. is the largest trading and investment partner for the European Union.
Trump suggested that the UK, which exited the EU in 2020, may not be subject to tariffs.
Over the weekend, Trump acknowledged that tariffs may bring some short-term pain to American consumers, but he stated that these tariffs are necessary to curb illegal immigration and drug trafficking, as well as to stimulate domestic industrial development.
(This article referenced relevant reports from Reuters)