Trade tensions between the United States and China are very high at this point in time, as China answered the recent 10% tariff on Chinese imports that was imposed by President Donald Trump with counter-tariffs against U.S. products. It renewed the trade war between the two largest economies in the world following an indication from China’s Finance Ministry that U.S. tariffs violated regulations set by the World Trade Organization.
A tough-sounding China hinted it could be “may be forced to take countermeasures,” besides saying there are “no winners in a trade war.” Chinese Ambassador Fu Cong, Permanent Representative to the UN, said China was “firmly opposed” to the unauthorized increase and violation of WTO rules.
Other retaliatory measures involve a 15% tariff on US coal and liquefied natural gas exports, while the tariffs for crude oil, agricultural machinery, and large-displacement vehicles have reached 10%. These will all take effect on February 10. Export controls on rare metals such as tungsten, tellurium, and molybdenum were imposed, citing national security.
In a surprise move, China has also launched an antitrust probe into Google, alleging the company of monopolistic practices. The investigation is seen as a tit-for-tat move for the U.S. tariffs, with the State Administration for Market Regulation of China saying that Google is suspected of violating the country’s Anti-Monopoly Law.
The U.S. tariffs were imposed recently to push China to do more to cut the flow of illicit drugs, but this swift retaliation upsets that calculus and raises concerns about the broader implications of the escalating trade war. Trump’s description of the tariffs as an “opening salvo” in his trade offensive against China has only heightened tensions.
The White House responded to say, “President Trump is taking bold action to hold Mexico, Canada, and China accountable for their promises to halt illegal immigration and stop the flow of harmful drugs like fentanyl into our country.” Fu Cong shot back that the U.S. ought to look at its own demand for fentanyl rather than blame-shifting, warning this approach may not serve the U.S. interest in the long run.
But still, there is a glimmer of hope that it could be resolved. In a few days, President Trump is going to speak with Chinese President Xi Jinping, and that has raised the hope of analysts, who now expect a mutually beneficial agreement to happen that will reduce the trade tensions and further economically devastate both countries.
The consequences of this trade war will be far-reaching, ranging from economic impacts on both countries. China’s tariffs on U.S. imports would, for sure, result in heavier losses to American businesses and consumers, while U.S. tariffs on Chinese goods could lead to increased prices and decreased demand within the U.S. market.
