After China retaliated with its own policies against the US’s imposition of tariffs, the trade war between the two largest economies in the world has intensified.
After President Donald Trump imposed a 10% tariff on all Chinese imports to the US, Beijing has taken a number of actions, including targeting specific American items with retaliatory penalties.
This most recent tit-for-tat is nothing new in certain respects; it is part of a long-running trade dispute between the two countries, in which tariffs have been threatened and imposed on a number of items since 2018.
A deal may yet be reached because Trump has stated that he intends to speak with Chinese President Xi Jinping. However, if China responds as scheduled on February 10th, what could the impact be?
Coal, oil and gas
China has announced 10% import charges on US coal and LNG, as well as a 15% charge on crude oil, as part of its response to Trump’s policies.
According to Beijing’s reaction, businesses wishing to import fossil fuels from the US would be required to pay the fee.
Although Russia, Australia, and Mongolia are other providers, Indonesia provides the majority of the coal that China imports, making it the top importer of coal in the world.
China has been importing more LNG from the US, with amounts almost doubling from 2018 levels, according to Chinese customs data.
However, China’s entire fossil fuel trade is small; in 2023, US imports made up only 1.7% of China’s total foreign crude oil purchases. This implies that since China is not reliant on the US, the tariffs may have little effect on its economy.
China could easily procure additional supplies from Russia, where it has already been purchasing oil at a discount as the Kremlin looks to finance its war effort, according to Rebecca Harding, a trade economist and the head of the Centre for Economic Security think group.
On the other hand, the US exports more LNG than any other country in the world, and it has many additional clients, namely the UK and the EU.
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Agricultural machinery, pick-up trucks and big cars
China has imposed a 10% duty on pick-up trucks, some large automobiles, and agricultural machines in addition to fuel.
However, since China imports relatively few US pickups and imports the majority of its automobiles from Europe and Japan, a 10% tariff on a relatively small number of imports would not have a significant negative impact on customers.
China has made more investments in agricultural equipment recently in an effort to boost output, lessen its dependency on imports, and improve its food security.
Tariffs on agricultural equipment could therefore be another attempt to support homegrown business.
All of the tariff measures were “fairly modest, at least relative to US moves,” according to Julian Evans-Pritchard, head of China economics at consulting firm Capital Economics.
He estimates that the targeted items from China account for roughly 12% of China’s overall imports from the US, or $20 billion (£16 billion) in yearly imports.
“This is a far cry from the more than $450bn worth of Chinese goods being targeted by the US.”
However, he stated that China had “clearly been calibrated to try to send a message to the US [and domestic audiences] without inflicting too much damage” .
Google probe
An anti-monopoly probe into the US tech giant Google is one of the non-tariff measures that the Chinese authorities have also announced.
The investigation’s scope is unknown, but to put things in perspective, Google’s search services have been restricted in China since 2010.
By collaborating with local developers to provide apps and games to the Chinese market, the company maintains a small commercial presence in the nation.
However, China only accounts for around 1% of Google’s worldwide sales, so it wouldn’t be much worse off if it severed all relations with the nation.
Calvin Klein added to ‘unreliable entities’ list
The American company PVH, which owns designer labels Tommy Hilfiger and Calvin Klein, has been placed on China’s list of “unreliable entities” and accused of taking “discriminatory measures against Chinese enterprises.”
Beijing compiled the list, which includes other US companies, in 2020 as trade tensions escalated.
Being on the list will make it more difficult for Calvin Klein and Tommy Hilfiger to conduct business in China. They risk fines and the revocation of their foreign workers’ work permits, among other penalties. According to Andreas Schotter, a professor of international business at Western University in Ontario, Canada, regulators would also visit the companies’ plants to look at their operations.
The US has its own “entity list” that prevents some organizations from purchasing goods from US businesses without Washington’s consent.
“Just as President Trump is attacking Chinese companies, China is retaliating. Prof. Schotter went on to say, “All of this is a part of the US-driven decoupling of the US and China.”
Export controls on rare metals
China has implemented export restrictions on 25 rare metals in addition to imposing levies on businesses wishing to buy items from elsewhere.
Some of the metals are essential parts of numerous military and electrical devices.
Nearly 90% of the world’s refined output comes from China, which has perfected the art of refining such metals.
Tungsten, a vital component for the aerospace sector and a hard-to-source commodity, is on the restricted list. Although exports are restricted, Mr. Evans-Pritchard of Capital Economics noted that no limitations were taken to target the essential metals that China imports from the US for use in high-end chips, semiconductor gear, pharmaceuticals, and aerospace equipment.
Previous rounds of restrictions have shown that exports will decline precipitously as businesses rush to obtain licenses, a process that takes weeks.
The United States seems to have a strategy regarding the effects of the restrictions. Trump stated on Monday that in return for $300 billion in assistance in Ukraine’s conflict with Russia, Ukraine should ensure the supply of additional rare earth metals.