China's Strategic Retaliation Against US Tariffs: Five Key Measures

The ongoing trade war has seen China retaliate against the US's recently imposed tariffs by introducing its own measures, including increased taxes on energy imports, agricultural machinery, and tech companies. This new phase focuses on specific American products while maintaining a balance to avoid significant damage to its economy.

In a significant move amidst a spiraling trade war, China has retaliated against new US tariffs by implementing various countermeasures aimed at specific American goods. Following the introduction of a blanket 10% tariff on all Chinese imports by President Donald Trump, Beijing's actions are part of a long-standing dispute between these two economic titans, which has seen similar moves since 2018.

On February 10, China plans to apply new taxes that specifically target energy imports, including a 10% tariff on coal and liquefied natural gas (LNG) and a 15% tax on crude oil. This measure means that Chinese companies wishing to import these fossil fuels from the US will incur additional costs. China relies heavily on coal imports, mainly from countries like Indonesia, with the US accounting for only a small fraction of its overall crude purchases in 2023. Thus, experts believe the tariffs may have a minimal impact on the Chinese economy, particularly as China can easily turn to other suppliers, such as Russia, for energy.

In addition to fossil fuels, China has imposed a 10% tariff on agricultural machinery, pickup trucks, and larger vehicles. However, since US imports of these categories are relatively low, the consumer impact is expected to be limited. This move also aligns with China’s intent to bolster its domestic industry and food production capabilities.

In a notable non-tariff retaliation, China is initiating an anti-monopoly investigation into Google, which has faced numerous restrictions in the Chinese market since 2010. Although the details of this probe remain unclear, it further illustrates the increasing tensions and the complexity of global business operations.

Furthermore, the addition of PVH Corp., which owns Calvin Klein and Tommy Hilfiger, to China’s "unreliable entity" list signifies escalating scrutiny on US companies operating in China. This designation may lead to significant restrictions on their business activities within the country.

Lastly, China has imposed export controls on 25 critical rare metals essential for numerous high-tech products and military equipment. Notably, China produces about 90% of the world's refined supply of these metals, and while the new controls may disrupt US companies' access, the Chinese measures do not currently target the critical materials it imports from the US.

Overall, while China's retaliatory approaches send a strong message to the US and resonate domestically, their overall economic impact appears to be carefully calibrated to avoid major disruptions. As the situation continues to unfold, potential discussions between Trump and President Xi Jinping could pave the way for negotiations to ease the heightened trade tensions.