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China strikes back in Trump's trade war: tariffs on American products and an antitrust investigation on Google

Updated

The new tariffs on hydrocarbons and machinery will come into effect on February 10

President Donald Trump, right, talks with China's President Xi Jinping.
President Donald Trump, right, talks with China's President Xi Jinping.AP

China makes a move in the new trade war: it will impose tariffs ranging from 10% to 15% on some American products starting on February 10. This is Beijing's response to counter the 10% tariffs on Chinese products announced by the Donald Trump administration.

China has announced that it will impose additional tariffs of 15% on imports of coal and natural gas from the United States and apply an additional tax of 10% on oil, agricultural equipment, and high-emission vehicles.

China's Ministry of Finance stated on Tuesday that the unilateral imposition of tariffs by the US gravely violated the rules of the World Trade Organization (WTO). "Not only is it useless in solving its own problems, but it also undermines the normalcy that existed in economic and trade cooperation between China and the US," it added.

Additionally, Beijing also announced a series of controls on key mineral exports (tungsten, tellurium, bismuth, molybdenum, and indium) and launched an antitrust investigation on the US tech giant Google. No further details or reasons for this investigation were provided. The US tech giant has been unavailable - failing to pass through China's Great Firewall censorship - since 2010.

The Ministry of Commerce also included the US clothing company PVH (owner of Calvin Klein and Tommy Hilfiger) and the biotechnology company Illumina on its list of "unreliable entities", stating that both companies had "disrupted normal transactions with Chinese companies and taken discriminatory measures against them, severely undermining their legitimate rights and interests." This measure, according to Chinese authorities, aims to "safeguard national sovereignty, security, and development interests."

Beijing has been preparing for a 2.0 trade war for months, a new phase much tougher than the tariff battle unleashed by Trump in his first term by imposing tariffs on Chinese products worth around $550 billion. In response, China applied tariffs on American products worth $185 billion.

It took about a dozen rounds of talks over approximately a year and a half before the two parties agreed in January 2020 to the so-called "Phase One" agreement, which ended reciprocal tariff increases.

However, since 2021, the Biden administration has continued to impose additional tariffs and unleashed a crusade against Chinese exports, as well as including up to 75 Chinese companies on Washington's blacklist and imposing restrictions on US investments in China in sectors such as semiconductors, artificial intelligence, and quantum computing.

In this context, Beijing also imposed its own controls, limiting the export of highly demanded critical minerals and related technologies on which countries rely to manufacture anything from weapons to chips.

Beijing's trade counterattack came a few days after Trump, targeting its major rival, announced that he would impose an additional 10% tariff in response to "China's failure" to stop the entry of lethal fentanyl into the US. The new tariffs on Chinese products, which Beijing said it would challenge with a complaint to the WTO, took effect on Tuesday because China did not benefit from the one-month truce that the Republican leader granted to Canadian and Mexican products, on which he had imposed, now suspended, tariffs of 25%.

In recent years, the Asian superpower, to reduce its economic dependence on the US as was the case during Trump's first term, has strengthened its trade agreements in Africa, South America, and Southeast Asia, becoming the main trading partner of over 120 countries.

Beijing has significantly increased its commercial presence and supply chains worldwide, especially establishing a close trade relationship with many emerging economies that rely on low-cost Chinese products.

Many analysts even see in Trump's protectionist strategy a great opportunity that Beijing can benefit from if it can position itself as a stable and attractive trading partner, to strengthen commercial ties even with Washington's old allies.

"China has diversified its trading partners, focusing on rapidly growing emerging economies. It has taken advantage of the years between the two Trump administrations to diversify its activities and move away from the US market. In 2017, China exported approximately $2.70 to emerging economies for every dollar it exported to the United States. Today, that ratio is $4.25 to every US dollar," analyzes an article from Financial Review, an Australian newspaper specializing in global finance.

The proportion of Chinese products directly heading to the US has steadily decreased since 2018. Additionally, US demand for these products now accounts for less than 3% of China's GDP. Some experts suggest that if Trump were to fulfill his campaign promises of imposing 60% tariffs on Chinese products, it would barely affect the world's second-largest economy with a mere 1% contraction.

The new trade war has caught the Asian country dealing with many internal economic turbulences due to weak consumption, a real estate crisis, local government debt, high youth unemployment, foreign capital outflow, and the loss of wealth among middle-class families. Nevertheless, Chinese authorities announced a few weeks ago that in 2024, their GDP met the forecast of 5% growth, mainly thanks to the increase in exports.

The main driver of the Chinese economy lies in the recently announced trade surplus: exports, according to customs data, grew by 5.9% year-on-year, while imports increased by 1.1%, resulting in a surplus of $992.1 billion. "China has solidified its status as the world's largest goods exporter," boasted Wang Lingjun, Deputy Director of the General Administration of Customs.