The News
China announced tariffs on US imports, an antitrust investigation into Google, and export curbs on critical minerals in Beijing’s latest retaliation for US President Donald Trump’s imposition of a blanket 10% duty hike on all Chinese imports to the US.
Beijing ordered tariffs of 15% on liquefied natural gas, coal, and oil, with experts warning further tit-for-tat between the two powers could cascade into a global trade war.
Beijing said the restriction of minerals — used to make chips and other components used in many green technologies — was intended to “safeguard national security interests.” The US has severely restricted China’s access to such high-end chips for years, but China controls much of the global supply of the minerals used to make them.
Trump is set to speak with Chinese President Xi Jinping on Tuesday, The Wall Street Journal reported.
SIGNALS
The US-China trade war is heating up
China’s initial response to Donald Trump’s tariffs was relatively muted: Beijing sued the US at the World Trade Organization — a largely symbolic gesture — while markets remained closed for Lunar New Year. But the new restrictions and tariffs demonstrate that China is “serious” about not being pushed around, one analyst based in Shanghai told Nikkei Asia: China “looks much more confident” of its position in a potential trade war now compared to during Trump’s first term. China’s retaliatory moves “have clearly been calibrated” to try and send a strong message but leave the door open to negotiations, a China economics expert told CNN. One point of leverage could be TikTok: Trump posted on Truth Social Tuesday that a deal to sell the app — which Beijing has previously opposed — would be “wonderful for China.”
Beijing has a lot to lose
While some experts see China’s response as more calculated, the measures also reflect the reality that the world’s second-largest economy has a lot to lose, Bloomberg wrote. China’s economy has slumped since the COVID-19 pandemic, and the government has relied on manufacturing and exports to maintain growth and offset various deflationary pressures, including an overblown property market and stagnant consumer spending. “A full-blown tariff war is not in China’s interest,” one analyst told the outlet. “Instead, China is likely to respond to tariffs mainly through domestic stimulus,” he added. So far, China’s cautious reply has avoided roiling markets, which were “whipsawed” earlier in the week by Trump’s announcement of unilateral tariffs on China, Mexico, and Canada, Bloomberg added.
Trump’s trade war is also a war on drugs
While Donald Trump has widely condemned Mexico and Canada — who also face tariff threats — for failing to stop the flow of drugs across US borders, the US President saved his “most incendiary claims” for China, The Economist wrote, suggesting that China’s Xi Jinping had promised to execute drug smugglers during Trump’s first term. “That would have stopped it,” Trump told reporters last month. “But we’ll have to stop it with tariffs.” China is the source of many of the ingredients used in the illegal fentanyl made by Mexican cartels. “Mr Trump’s claims about the opioid trade are hyperbolic, and his remedy counterproductive, but there is little doubt the synthetic drugs trade is a problem and that China could do more,” the outlet noted.