Beijing Responds to U.S. Tariffs
China has announced new tariffs on several U.S. products in response to President Donald Trump’s decision to impose a 10% tariff on all Chinese imports. The Chinese government declared a 15% tariff on coal and liquefied natural gas (LNG) and a 10% tariff on crude oil, agricultural machinery, and large-engine cars. These measures will take effect on February 10, 2025.
Although China has hit back, its response is more measured compared to Trump’s sweeping trade action. The move appears to be a calculated step, leaving the door open for negotiations before a full-blown trade war erupts.
A Last-Minute Window for Diplomacy
With the tariffs set to be implemented in early February, both the U.S. and China still have time to de-escalate tensions. The White House has confirmed that Trump and Chinese President Xi Jinping will hold a phone call later this week.
China’s countermeasure is selective, targeting areas that minimize damage to its own economy while still making a statement. Unlike Trump’s across-the-board tariffs, China’s new levies focus on goods that are not vital to its economy. For example, China imports most of its cars from Europe and Japan, and only 2.3% of U.S. LNG exports go to China.
By imposing tariffs in less critical areas, Beijing is likely gaining leverage for the upcoming negotiations while keeping its economy stable.
China’s Strategy: Play Smart, Stay Strong
China is playing a long game. Instead of rushing into a full trade war, Beijing is using careful diplomacy. It has warned of potential countermeasures but has not yet gone all-in with heavy economic retaliation.
Trump’s tariffs aim to weaken China’s trade dominance, but Beijing has learned from past confrontations. It has worked for years to reduce its dependence on foreign trade and strengthen domestic production. Today, imports and exports make up only 37% of China’s GDP, compared to over 60% in the early 2000s.
Although Trump’s 10% tariff will sting, China appears confident that it can absorb the blow—at least for now. However, if Trump raises tariffs to 60% as he previously suggested, the situation could spiral into a serious economic confrontation.
A History of Trade Tensions
This is not the first trade war between the world’s two largest economies.
Between 2018 and 2020, Trump and Xi engaged in a tit-for-tat tariff battle that saw hundreds of billions of dollars worth of goods taxed on both sides. The dispute dragged on for over two years before the two countries signed a deal in 2020, where China agreed to purchase $200 billion more in U.S. goods.
However, the COVID-19 pandemic derailed the agreement, and the U.S. trade deficit with China now stands at $361 billion.
Will History Repeat Itself?
Beijing is thinking several steps ahead this time. It knows that during the last trade war, it ran out of U.S. goods to tax since China exports far more to the U.S. than it imports.
Instead of relying solely on tariffs, analysts suggest China could explore other retaliatory measures. These may include:
– Tighter restrictions on U.S. businesses operating in China
– Stricter regulations on American investments
– Reducing access to critical raw materials needed by American companies
By diversifying its strategy, China is preparing for a long-term economic battle if negotiations fail.
Clock is Ticking: Businesses Watching Closely
The global economy is now at a critical crossroads. While the trade war has not fully erupted yet, businesses worldwide are holding their breath. The upcoming Trump-Xi phone call will determine whether the two leaders can reach a settlement or if this dispute escalates into another full-scale economic conflict.
For now, the world is watching—and waiting.