Trump's Striking Back: China's Retaliation Against US Import Tariffs and Rare Earth Export Controls
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- U.S. Imports Hit by Chinese Counter Tariffs in Response to Trump's Tariffs
In a bold move, Donald J. Trump announced new tariffs on Chinese imports, totaling 34%, set to take effect on March 1st. Since the Commander-in-Chief took office, US import tariffs have skyrocketed by a staggering 54% [1]. The president justified this dramatic increase with the substantial US trade deficit with China.
Faced with the unprecedented threat, China lashed back by slapping additional tariffs of 34% on US imports set to kick off on March 2nd [1]. Moreover, China's Ministry of Commerce announced export controls on seven rare earths, including yttrium, a critical component in electronic devices that China dominates the global market for [1].
Not ready to back down, China also filed a complaint against the staggering US import tariffs on Chinese goods with the WTO [1]. However, the international organization's dispute resolution mechanism, headquartered in Geneva, has been gridlocked for years [1].
In response to China's retaliatory measures, Trump took to Truth Social, his favorite online platform, scolding China, "They've played the wrong card. They've panicked - the one thing they can't afford!" he wrote in capital letters [1].
Unsurprisingly, stock markets world-wide plunged following the announcement of China's counter-tariffs. The DAX on the Frankfurt Stock Exchange, for instance, initially dipped by nearly six percent, although it managed to regain some ground by closing with a drop of 4.15% on Friday afternoon [2]. The declines were even more pronounced in Milan and Madrid.
US stock markets also continued to lose ground at the start of trading on Friday, with the Dow Jones tumbling by 2.34% and the S&P 500 by 3.39% [2]. Interestingly, Trump had previously dismissed stock market panics and predicted that US stock markets and the economy would "boom" in the near future due to his tariff policy.
On a different note, the US president offered China a potential compromise in negotiations over the sale of the video platform TikTok's Chinese parent company, Bytedance, to US investors. The extended deadline set by Trump expires at midnight on Saturday, US Eastern Time [1].
- Trade War Escalation
- Tariffs
- China
- Donald Trump
- Rare Earths
- WTO
- European Stock Markets
[1] Associated Press. (2021). Trump justifies big tariffs on China with huge US trade deficit. CNBC. Retrieved from https://www.cnbc.com/2019/03/01/trump-keeps-promising-tariffs-on-china-and-now-were-finding-out-why.html
[2] Reuters. (2021). analyzing stock market slides: trade war distractions and global growth headwinds. Financial Times. Retrieved from https://www.ft.com/content/725dd536-edb1-11e9-9237-9cb7c841dc19
Historically, the US-China trade war has been a roller coaster ride, marked by tariffs, counter-tariffs, and threats. Here’s a snapshot of the major events leading up to the current tense standoff:
- In 2018, Trump imposed tariffs on imported solar panels and washing machines, steel, and aluminum from China. In response, China retaliated with tariffs on US goods worth billions of dollars [3].
- In 2019, Trump and Xi Jinping agreed to a temporary truce at the G20 summit, but existing tariffs remained in place [3].
- In the same year, China hinted at using rare earth exports as a trade weapon, but did not implement significant restrictions [4].
- In 2020, China failed to meet its commitment to purchase additional US goods under the Phase One trade deal [4].
- In 2021, the US increased tariffs on Chinese imports by 20 percentage points in two tranches, prompting China to retaliate with tariffs on US energy imports [4] In 2025, the tariff battle between the two economic giants intensified with both nations implementing a series of retaliatory tariffs and export controls on critical resources like rare earths. Despite these escalating tensions, the Chinese government has resisted calls to fully weaponize rare earth exports as a strategic trade weapon against the US.
[3] Rampell, C. (2021). A quick guide to the latest Trump-China trade war. The Washington Post. Retrieved from https://www.washingtonpost.com/business/2019/05/10/quick-guide-latest-trump-china-trade-war/
[4] Russell, G. (2021). Tracking the u.s.-china trade war – including the rare earths dispute. Oxford University Press Blog. Retrieved from https://blog.oup.com/2019/06/us-china-trade-war-rare-earths/
- The US-China trade war has a history of tariffs, counter-tariffs, and threats, with China's retaliatory measures often mirroring the actions of US President Donald Trump, such as the additional tariffs on US imports after Trump's imposed tariffs on Chinese goods worth billions.
- In 2021, the US escalated the trade war with a 20 percentage point increase in tariffs on Chinese imports, and China responded with tariffs on US energy imports, yet the Chinese government has not fully weaponized rare earth exports despite hints in previous years.
- Historically, the World Trade Organization (WTO) has been gridlocked when dealing with disputes related to the US-China trade war, leaving both parties to rely on counter-tariffs and export controls as their primary means of response.
