The US President is threatening to increase tariffs on imports from China by another 50 percent if the Chinese government does not withdraw its planned tariff hikes. The escalating trade tensions between the two economic giants show no signs of abating.
China exports mainly toys, machinery, steel, aluminum, and furniture to the US.
The escalating spiral in the US-China trade war is spinning faster and faster. China is prepared to “fight to the end” if US President Donald Trump decides to raise tariffs on Chinese goods by another 50 percent, the Chinese Ministry of Commerce stated in a brief announcement on Tuesday morning.
On Monday, Trump declared that he would increase tariffs on imports from China by 50 percent on Wednesday if Beijing does not immediately reverse its planned tariff hikes on US goods, adding, “All talks regarding meetings requested by China will then be terminated.”
Trump apparently caught off guard
“To safeguard its own rights and interests, China will take resolute countermeasures if the US escalates tariffs,” the Chinese Ministry of Commerce’s statement now reads.
The Chinese government announced last Friday that it would raise tariffs on US goods by 34 percent. The new tariff rates are set to take effect next Friday. Trump seems to have been caught off guard by Beijing’s resolute response.
The latest tariff increase threatened by Trump is expected to take effect on Wednesday. This would raise the average tariff rate on imports from China to well over 100 percent, practically halting Chinese-American trade, according to experts. This would have significant implications for global trade and supply chains.
Just two and a half months into Trump’s presidency, US-China relations are more strained than they ever were during his first term. China’s President and Party Chief Xi Jinping is likely interpreting Trump’s actions as an attempt to isolate China permanently. Xi is expected to use all available means to resist such containment efforts by the US.
Beijing running out of time
There is keen anticipation to see what specific measures China’s government will take to counter the new tariffs threatened by Trump. Beijing does not have much time to make a decision.
To ease pressure on exports, China may devalue the Yuan. However, such a move carries the risk of capital flight. Other options include a broad boycott of American goods and further restrictions on the export of rare earths.
If Trump follows through on his threat, the already significant economic damage to China would be even greater. The US is China’s largest market; over 14 percent of all Chinese exports went to America last year.
In 2024, China exported goods totaling $438 billion to the US. In contrast, the volume in the opposite direction was only $143 billion.
Implications for the job market would be severe
Key products include toys, machinery, steel, aluminum, and furniture, all products of labor-intensive industries. The impact on the already strained job market would be severe.
Stock markets in Hong Kong were trading significantly higher at midday. The Hang Seng Index of the Hong Kong Stock Exchange gained 1.8 percent, while the Hang Seng China Enterprises Index rose by 2.5 percent. The CSI 300, the main index of the Shanghai and Shenzhen stock exchanges, was up by almost 1 percent.