China Imposes High Tariffs as Retaliation on U.S. Imports - China Impose Retaliatory Tariffs on U.S. Goods in Response
Rowdy Remarks:
The heated trade feud between the US and China intensifies as China responds with hefty tariffs – now all US products will have an extra 34% tax slapped on them, according to the Chinese Ministry of Finance. These tariffs kick in on April 10, and to add fuel to the fire, 11 US companies have been blacklisted, making further trading impossible. China's countermeasures can fan the flames of the conflict started by Trump, with concerns about the global economy's health growing.
Trump initiated a record-breaking tariff package, imposing additional duties on imports from around the world, including a 34% tax on Chinese imports, announced on Wednesday. Key trading partners feel the brunt of this. The US-China trade war is a full-blown hostility declaration against global trading partners. China had already hit back with 20% tariffs on US goods, and now, the People's Republic faces a more substantial 34% tariff burden, surpassing 50% for Far East products.
China, the world’s second-largest economy, acts as the global export kingpin. Major exporting nations like Germany heavily benefit from open markets, and the EU has prepared countermeasures in response. Financial markets take a nosedive, and oil prices plunge as a result.
The fallout was met with further losses on global financial markets. The German stock market continued sliding after the tariff shock. The DAX index suffered more significant losses and plummeted over 4% in the afternoon. The Dow Jones Industrial Average saw another 2.5% drop in early trading, following a 4% fall the previous day. The next few trading days could lead to a worrying week, marking the worst performance since October 2020.
The tech-heavy Nasdaq 100 sinks to its lowest level since August 2024. Fear of a global economic downturn sends oil prices spiraling downward once more. Prices for North Sea and US crude oil hit their lowest levels since 2021.
The BGA, the German Association of the Automotive Industry, calls China's actions escalatory. They see little hope that the American side will concede and begin negotiating. "We're now at the beginning of a global trade war that will escalate, leading to further stages, and potentially plunging the global economy into a major crisis," said BGA President Antonin Finkelnburg.
Similarly, DiHK's Chief Economist for Foreign Trade, Volker Treier, notes that China's announcement exacerbates the situation in the export-oriented German economy. A conflict between the US and China will stifle global trade, especially burdening Germany as an export nation. Decreased international demand could significantly impact the German economy.
Rolf Langhammer from the Kiel Institute for the World Economy predicts the beginning of a global escalation spiral that has the potential to lead to a global recession. He also stated that the EU will respond relatively quickly. "Trump is bearing the brunt of these new Chinese counter-tariffs more than China, as his plans to reduce the US trade deficit through increased US exports to China are now blown," Langhammer remarked.
China exporting more to the US
Exports are a cornerstone of the Chinese economy. Although China's exports rebounded in 2024 and made a giant leap just before Donald Trump took office, the trade surplus soared to a whopping 937 billion US dollars – a record high.
In 2024, the US imported goods from China worth about 439 billion US dollars (398 billion euros), an increase of 2.8% from the previous year. On the flip side, US exports of goods to China amounted to 143.5 billion dollars, a decrease of 2.9% from 2023. The US trade deficit with China amounted to over 295 billion US dollars, a rise of 5.8%. This deficit has been a thorn in Trump’s side for years.
Peking denounces US tariffs as "harassment"
The measures taken by China are seen as a clear sign that it will not back down in its dispute with the US. As a result, the Chinese government immediately imposes export controls on rare earths to the US. These minerals are crucial for manufacturing smartphones, LEDs, electric motors, and wind turbines, mostly mined in China. Furthermore, Peking has filed a complaint against the US at the World Trade Organization (WTO).
Peking views the tariffs as "harassment" that violates international trade rules and "seriously undermines China's legitimate rights and interests," according to a statement from the customs commission of the Chinese State Council.
China's market supervision authority has also launched an investigation against the US company DuPont, suspected of violating Chinese antitrust law. The investigation is likely to be politically motivated.
Trump offers tariff relief
Trump had offered China a tariff reduction and linked the dispute to the short video app TikTok. TikTok was scheduled to be sold by parent company Bytedance under a US law by January 19 – or shut down in the US. However, Trump granted an extension that expires on April 5.
"We have a situation with TikTok where China might say: We'll agree to a deal, but will you do something about the tariffs?", Trump recently said.
- Despite the ongoing trade conflict, EC countries may find themselves in a challenging employment scenario due to the impact of tariffs on their exports to China, a significant global export market.
- Given the escalating trade war, particularly the imposition of heavy tariffs by both sides, policymakers in EC countries might need to reconsider their employment policies to address potential job losses and economic instability.
- In light of the growing trade tensions and potential economic slowdown, EC countries may have to reassess their employment policies, considering the negative outlook that tariffs could have on their trade relations with China and, consequently, on their domestic employment market.
