China has implemented a new set of tariffs on United States imports, marking another chapter in the ongoing economic tensions between the two global powers. The tariffs, effective from Monday, affect approximately $13.86 billion in goods, including a 15% tax on certain coal and liquefied natural gas products, alongside a 10% tariff on crude oil, agricultural machinery, and some vehicles. This move comes in response to the US’s imposition of tariffs on over $163 billion worth of Chinese goods each year, covering similar categories such as crude oil, liquified natural gas, and various machinery and vehicles.
China's imports from the US are valued at over $524 billion annually, making the new tariffs a modest fraction, less than 9%, of its total imports from the US. Yet, these actions reflect the broader strategic maneuvers in the complex trade relations between the two countries. While the US imports from China stand at over $163 billion, both nations continue to grapple with balancing economic interests amid escalating tensions.
“Beijing has been restrained in its response to the new Trump tariffs. Both because the impact on China is modest, and because Xi wants to leave room to negotiate with Trump,” – Andy Rothman, CEO of advisory group Sinology.
China appears to be adopting a cautious approach, reflecting its strategic interest in maintaining negotiation channels open with the US. The restrained response contrasts with the more aggressive tit-for-tat actions witnessed during the trade conflicts from 2018 to 2019. The current tariffs signify a tactical shift towards more targeted economic measures rather than sweeping retaliatory steps.
“Trump’s trade actions will force Beijing to respond, but with a more targeted touch this time around, rather than the sweeping tit-for-tat actions that we saw in 2018 to 2019 when the trade war first erupted,” – Nick Marro, principal economist for Asia at Economist Intelligence (EIU).
China's economic strategy is further complicated by its domestic challenges, including slowing growth, persistent deflation, and weak consumer demand. In response, Chinese officials have been meticulously preparing for potential penalties and concessions should President Trump decide to escalate trade measures further. These preparations also involve revamping export control regulations to restrict dual-use goods, raw materials, and critical minerals in which China holds significant control—60% of global production and 85% of processing capacity.
“They were preparing for 60% tariffs and complete decoupling … nothing has happened that’s even close to the worst case scenario,” – Suisheng Zhao, director of the Center for China-US Cooperation at the University of Denver.
The US administration has ordered an investigation into US-China economic ties by April 1, potentially setting the stage for further actions. President Trump has expressed openness to negotiating a deal with China, emphasizing his campaign promise to level the economic playing field. However, the specifics of what Trump seeks from Chinese President Xi Jinping and what he might be willing to offer remain unclear.
“Trump appears to be in dealmaking mode, using tariffs as a negotiating tool … It is not clear, however, what Trump wants from Xi, and what he is willing to offer in return,” – Andy Rothman, CEO of advisory group Sinology.
China's leadership is keen on avoiding escalation with the US due to its relatively weaker leverage in the bilateral relationship. This cautious stance aims to pacify Trump's administration while attempting to redirect any animosity towards other international actors.
“(Chinese leaders) don’t want to see escalation … China’s leverage is not as strong as the United States, so they must take all the opportunities they could to try to pacify Trump and to let Trump make enemies of other countries,” – Suisheng Zhao, director of the Center for China-US Cooperation at the University of Denver.
Despite these tensions and strategic maneuvers, there remains skepticism about reaching a comprehensive agreement that addresses macro-level trade issues between the two nations. Given past negotiation failures, there is doubt regarding the US's interest in pursuing an expansive deal that extends beyond specific trade elements like TikTok's future in America.
“Given the failure of past negotiations, the US’s appetite for a sweeping deal – one that goes beyond micro-level discussions, like the future of TikTok – doesn’t seem very strong these days,” – Nick Marro, principal economist for Asia at Economist Intelligence (EIU).
