China's Response to US Tariffs: Five Key Measures

The trade tensions between the United States and China have intensified after the US imposed a 10% tariff on imports from China. In retaliation, China has unveiled a range of countermeasures that will take effect soon. This ongoing trade war has been a complex and evolving situation that began in 2018, with both nations imposing tariffs on various goods.

1. Tariffs on Fossil Fuels

China's first response includes imposing import taxes on certain US fossil fuels. Specifically, China plans to introduce a 10% tariff on coal and liquefied natural gas (LNG) and a 15% duty on crude oil. This means companies wishing to import these commodities from the US will now face additional costs. Although China is the world's largest coal importer, it mainly sources this resource from Indonesia. While LNG imports from the US have risen, they still account for a small portion of China's overall fossil fuel trade.

2. Agricultural Equipment and Vehicles

Beyond fossil fuels, China has announced a 10% tariff on various American products, including agricultural machinery, pickup trucks, and some larger vehicles. However, the impact of this measure may be limited, as China does not heavily rely on American pickup trucks and primarily sources its cars from Europe and Japan. The move to tax agricultural equipment might be seen as a way to promote domestic industries and reduce import dependency.

3. Anti-Monopoly Investigations

China has also signaled its intentions through non-tariff measures, such as launching an investigation into the US tech company Google for anti-monopoly practices. Google has been largely absent from China since its search services faced a ban in 2010, but it still collaborates with local developers on some apps. Nevertheless, China's market contributes minimally to Google’s overall global revenue, indicating that cutting ties wouldn't significantly affect the tech giant.

4. The Unreliable Entities List

In addition to these tariffs and investigations, China has added the American company PVH, which owns brands like Calvin Klein and Tommy Hilfiger, to its "unreliable entity" list. This classification holds companies accountable for perceived discriminatory actions against Chinese businesses. Those listed could face sanctions or increased scrutiny from Chinese regulators, impacting their ability to operate in the country.

5. Export Controls on Rare Metals

China has also taken steps to restrict exports of 25 rare metals, which are crucial for manufacturing various high-tech products and military equipment. China is currently the dominant player in the refining of these metals, producing almost 90% of the global output. The inclusion of tungsten, essential for the aerospace sector, highlights the strategic nature of this measure. However, notable exports of critical metals that China sources from the US remain unaffected by these restrictions, indicating a measured approach to retaliatory actions.

As the situation develops, both countries are still engaged in dialogues that may result in further negotiations. The economic implications of these tariffs and retaliatory measures on businesses and consumers on both sides remain to be seen.

China, Tariffs, Trade, Response, Economy