Beijing has retaliated against Donald Trump’s tariffs on Chinese imports with duties of its own but limited their scope in a possible bid to avoid a full-blown trade war.
The measures against US products ranging from liquefied natural gas to cars will take effect on February 10 and were announced on Tuesday, hours after Trump’s new additional tariff of 10 per cent on Chinese goods came into force.
Beijing also said it would launch an antitrust probe into Google, whose search engine is blocked in China.
China’s new tariffs target about $14bn of goods, according to Citigroup analysts — less than 10 per cent of total imports from the US in 2023, the last year for which there was full data.
The move was “not an escalatory response”, said Chris Beddor, deputy China research director at Gavekal. “They’re clearly aiming for negotiations and a deal.”
The trading relationship between the US and China has shaped both countries’ economies in recent decades. But China’s share of the US’s total imports has already fallen markedly since Trump introduced tariffs in his first term in office.
China’s latest measures against the US will impose tariffs of between 10 and 15 per cent on US LNG, coal, crude oil and farm equipment. Beijing will also impose tariffs on some car imports from the US and additional export controls on five rare metals.
Trump is expected to speak to China’s President Xi Jinping in the coming days, prompting hopes that the two leaders will be able to hammer out a deal to avert a full-blown trade war between the world’s two largest economies.
Hong Kong’s Hang Seng index, which had risen as much as 3.3 per cent in early trading, shed some of its gains to close up 2.7 per cent, while the offshore renminbi strengthened slightly to Rmb7.32 and oil prices edged down about 1 per cent.
The initial retaliation was a “more symbolic move”, analysts at Oxford Economics said, adding that Beijing’s move amounted to an increase in the overall weighted effective tariff rate of 2 percentage points on US imports.
The investigation into Google for suspected violations of anti-monopoly laws was announced by Beijing’s antitrust regulator on Tuesday.
While the search engine is blocked in China — along with most of parent company Alphabet’s businesses — the US group profits from Chinese businesses advertising abroad.
Chinese phonemakers also widely use its Android operating system, a long-standing point of frustration for Chinese officials, who chafe at American control of the software underpinning most smartphones.
During the first Trump administration, Washington blocked Huawei from Google’s software ecosystem, damaging sales of the Chinese national champion’s smartphone outside its home market.
Referring to this week’s moves by Washington and Beijing, Louise Loo, China lead economist at Oxford Economics, wrote in a note that “the trade war clearly [is] in the early stages”.
Trump unnerved allies and investors with a Friday evening announcement of levies on Canada, Mexico and China, which he accused of failing to curb immigration and the flow of the deadly opioid fentanyl and its precursors into the US.
But the tariffs against Canada and Mexico were put on hold for a month following last-minute talks on Monday between Trump and Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum.
China’s finance ministry said the US tariffs violated World Trade Organization rules. “It is not only unhelpful in solving its own problems, but also undermines the normal economic and trade co-operation between China and the US,” it said as it announced the new tariffs.
The ministry said US coal and LNG exports would face an additional 15 per cent tariff, while crude oil, agricultural machinery, cars and pick-ups would receive a 10 per cent tariff.
China was the second-largest buyer of US coal in the first three-quarters of 2024, accounting for 10.9 per cent of total coal exports and trailing only India, according to data from the US Energy Information Administration.
The country accounted for 2.9 per cent of US natural gas exports from January to November 2024, according to EIA figures.
The White House did not respond to a request for comment.
China’s commerce ministry on Tuesday also announced export controls on tungsten and more than two dozen other rare metal products and technologies, effective immediately.
Goldman Sachs analysts described China as a “dominant producer” of the metals subject to the controls, adding that “critical minerals [were] an increasingly important source of leverage”.
The Wall Street bank noted that Beijing blocked exports of several other key minerals in December — a move that hit the US semiconductor industry.
On Tuesday, China also expanded its “unreliable entity list”, a national security blacklist, by adding US biotech group Illumina and PVH Group, an American clothing maker whose brands include Calvin Klein and Tommy Hilfiger.
The ministry had previously investigated PVH for alleged discrimination against cotton from Xinjiang, the western region where Chinese authorities are accused of human rights abuses including forced labour.
There was some optimism for an agreement in the coming days to ease trade tensions. The antitrust probe into Google was intended as another bargaining chip, similar to China’s probe into US chipmaker Nvidia, said Gavekal’s Beddor.
But some economists expressed doubts that either side had much room for manoeuvre.
“The likelihood of [an] agreement to avoid tariffs appears limited,” said Robin Xing, chief China economist at Morgan Stanley. “Paths to de-escalation . . . remain narrow and would require significant compromises from both sides.”
Additional reporting by Demetri Sevastopulo in Washington and Zijing Wu in Hong Kong
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