China countered President Donald Trump’s tariffs on Chinese products with tariffs of its own on multiple US imports on Tuesday, February 4, as well as announcing an antitrust investigation into Google and other trade measures.
US tariffs on products from Canada and Mexico also were to go into effect on Tuesday, though Trump agreed to a 30-day pause on his threats against Mexico and Canada as they acted to appease his concerns about border security and drug trafficking. Trump planned to talk with Chinese President Xi Jinping in the next few days.
This isn’t the first round of tit-for-tat actions between the two countries. China and the US had engaged in a trade war in 2018 when Trump raised tariffs on Chinese goods and China responded in kind.
This time, analysts said, China is much better prepared to counter.
“They have a much more developed export control regime. We depend on them for a lot of critical minerals: gallium, germanium, graphite, a host of others. So … they could put some significant harm on our economy,” said Philip Luck, a former State Department official and director at the Center for Strategic and International Studies on Monday at a forum.
The slew of measures announced Tuesday cut across different sectors of the economy, from energy to individual US companies.
Counter tariffs
China said it would implement a 15 percent tariff on coal and liquefied natural gas products as well as a 10 percent tariff on crude oil, agricultural machinery and large-engine cars imported from the US. The tariffs would take effect next Monday.
“The US’s unilateral tariff increase seriously violates the rules of the World Trade Organisation,” the State Council Tariff Commission said in a statement. “It is not only unhelpful in solving its own problems, but also damages normal economic and trade cooperation between China and the US.”
China is the world’s largest importer of liquefied natural gas, with its top suppliers being Australia, Qatar and Malaysia. The US, which is the biggest exporter of LNG globally, does not significantly export LNG to China.
In 2023, the US exported 173,247 million cubic feet of LNG to China, representing about 2.3 percent of total natural gas export volumes, according to data released by the US Energy Information Administration.
Further export controls on critical minerals
In addition to the tariffs, China announced export controls on several elements critical to the production of modern high-tech products. They include tungsten, tellurium, bismuth, molybdenum and indium, many of which are designated as critical minerals by the US Geological Survey, meaning they are essential to US economic or national security that have supply chains vulnerable to disruption.
The export controls are in addition to ones China placed in December on key elements such as gallium used in manufacturing.
US companies also impacted
In addition, China’s State Administration for Market Regulation said Tuesday it is investigating Google on suspicion of violating antitrust laws. The announcement did not mention the tariffs but came just minutes after Trump’s 10 percent tariffs on China were to take effect.
It is unclear how the probe will affect Google’s operations. Google has a limited presence in China, and its search engine is blocked in the country like most other Western platforms. Google exited the Chinese market in 2010 after refusing to comply with censorship requests from the Chinese government and following a series of cyberattacks on the company.
Google did not immediately comment.
The Commerce Ministry also placed two American companies on an unreliable entities list: PVH Group, which owns Calvin Klein and Tommy Hilfiger, and Illumina, which is a biotechnology company with offices in China. The listing bars them from engaging in China-related import or export activities and from making new investments in the country.
Beijing began investigating PVH Group in September last year over “improper Xinjiang-related behaviour” after the company allegedly boycotted the use of Xinjiang cotton.
The response from China appears calculated and measured, said Stephen Dover, chief market strategist and head of the Franklin Templeton Institute. However, the world is braced for further impact.
“A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower GDP growth everywhere, higher US inflation, a stronger dollar and upside pressure on US interest rates,” Dover said.
