The United States and China find themselves entangled once again in rising trade tensions as China prepares to impose retaliatory tariffs on several American products. These retaliatory actions, announced by the Chinese government, signal potential escalation toward what many are labeling as the beginning of another global trade war.
Effective February 10, China will enforce tariffs of 15 percent on U.S. coal and liquefied natural gas (LNG), alongside 10 percent tariffs on crude oil, agricultural machinery, and certain vehicles like large-displacement cars and pickup trucks. The move came swiftly after President Donald Trump introduced additional tariffs of 10 percent on all goods imported from China.
China’s Ministry of Finance stated, “The unilateral imposition of tariffs by the US seriously violates the rules of the World Trade Organisation,” emphasizing the damage to economic cooperation between the two nations. Trump’s tariffs were framed as necessary actions to combat the influx of fentanyl – harmful synthetic opioids – from China, raising concerns within Washington about drug trafficking. “China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” Trump warned, leaving many to ponder the long-term strategy behind these aggressive policies.
These developments come at a time when both economies are under immense strain. Kathleen Brooks, research director at financial consultancy XTB, approached the situation cautiously, stating the tariffs were “not broad based, which suggests a conciliatory stance” from China. This perceived restraint contrasts sharply with the aggressive rhetoric and policy changes issued from Washington.
Market analysts remain divided on the potential outcomes of these tariffs. Jochen Stanzl, chief market analyst at CMC Markets, noted, “Investors are questioning whether Trump’s next move will lead to the sought-after compromise or ignite an unyielding trade war.” With stock markets already volatile, the stakes are high as global investors watch the situation closely.
China’s response was not limited to tariffs. The government also announced new export restrictions on materials including tungsten, tellurium, and molybdenum, which are often used in high-tech products, adding significant pressure to the already fragile supply chains affected by previous tariffs.
Experts see these retaliatory moves as “necessary countermeasures.” According to Qiu Huafei, professor of international relations at Tongji University, China’s measures are aimed at “trying to get some kind of leverage” amid negotiations. He states, “China is worried about showing weakness at this early stage.” Yet, the pre-existing economic troubles gripping China – including stagnant growth and a real estate market in crisis – create enormous challenges for the country as they navigate these new tariffs.
Historically, trade relations between the U.S. and China have been fraught with challenges. The previous trade war initiated during Trump’s first term led to billions of dollars’ worth of tariffs imposed on both sides, only to be followed by the signing of what was termed as the “phase one” trade agreement toward the end of Trump’s presidency. This pact included commitments from China to purchase significantly more American products, commitments the Peterson Institute for International Economics suggests were not adequately fulfilled.
With these new tariffs, U.S. consumers are likely to feel the pinch as they face increased prices on everyday items, including electronics and apparel. Jay Foreman, CEO of Basic Fun, reflected on the impact, indicating possible lower profits and higher customer prices due to the new tariffs. Foreman expressed optimism about negotiations, asserting, “There is a very big deal to be done between President Trump and Xi,” referring to discussions involving Chinese President Xi Jinping.
The backdrop of these negotiations looms large, as Trump’s administration has also recently postponed larger tariffs on goods from Mexico and Canada after commitments from those nations to bolster border security. Some experts argue this strategy is part of Trump's broader effort to leverage trade discussions across North America.
Moving forward, it remains uncertain how this new phase of trade disputes will evolve. With U.S.-China relations being characterized by competition and antagonism, the potential for negotiation remains, albeit clouded by conflicting interests and historical grievances. Trade experts, including Henry Gao from Singapore Management University, suggest China may also adopt alternative responses beyond tariffs to offset U.S. actions, which could involve sanctions or even leveraging their standing as global economic players.
Given the complex global economic environment and the fragility of the Chinese economy, the coming weeks will be pivotal as both nations grapple with the consequences of their trade policies and the paths forward remain perilously uncertain.