[BEIJING/BRUSSELS/PARIS] China on Friday (Apr 4) announced a slew of countermeasures against tariffs imposed by President Donald Trump, including additional tariffs of 34 per cent on all US goods and curbs on export of some rare earths, deepening an escalating trade war.
China’s finance ministry said the additional tariffs would be imposed from Apr 10.
Trump on Wednesday announced that China would be hit with a 34 per cent tariff, on top of the 20 per cent he imposed earlier this year, bringing the total new levies to 54 per cent.
Agriculture trade took another hit as Chinese customs imposed an immediate suspension on imports of sorghums from grain exporter C&D (USA), as well as poultry and bonemeal from three US firms.
Beijing also announced controls on exports of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium to the US, effective on Apr 4.
“The purpose of the Chinese government’s implementation of export controls on relevant items in accordance with the law is to better safeguard national security and interests, and to fulfil international obligations such as non-proliferation,” the commerce ministry said in a statement.
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It also added 16 US entities to its export control list, which prohibits the export of dual-use items to affected firms.
Another 11 US firms were added to the “unreliable entities” list, which allows Beijing to take punitive action against foreign entities. The targeted firms includes Skydio and BRINC Drones over arms sales to democratically governed Taiwan, which China claims as part of its territory.
The commerce ministry said the targeted companies seriously “undermined” China’s national sovereignty, security and development interests and would be prohibited from new investments, import and export activities in China.
It also launched an anti-dumping probe into imports of certain medical CT tubes from the US and India, and a wider industry competitiveness investigation into imports of medical CT tubes.
Nations from Canada to China have readied retaliation in a mounting trade war after Trump raised US tariff barriers to their highest level in more than a century this week, leading to a plunge in world financial markets.
Investment bank JP Morgan said it now sees a 60 per cent chance of the global economy entering recession by year end, up from 40 per cent previously.
Wall Street fell sharply at the opening on Friday, after China retaliated with fresh tariffs a day after the Trump administration’s sweeping levies knocked off US$2.4 trillion from US equities.
“China comes out swinging with an aggressive response to Trump’s tariffs,” said Stephane Ekolo, Market & Equity Strategist, Tradition, London.
“This is significant and is unlikely to be over, hence the negative market reactions. Investors are afraid of a ‘tit for tat’ trade war situation.”
Trump’s team has played down the market turbulence as an adjustment that would prove beneficial in the long run.
“To the many investors coming into the US and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!” Trump said in a social media post in all caps.
After Beijing’s retaliation, he posted that: “China played it wrong, they panicked – the one thing they cannot afford to do!”
Trump on Thursday had said he was open to talking to China and making a deal over TikTok by providing relief for US tariffs on Chinese goods in exchange for Beijing’s approval of the sale of the ByteDance-owned short video app.
Speaking to reporters on Air Force One, Trump said it was just an example and did not answer a question on whether plans were underway for him to talk to Chinese President Xi Jinping.
Shares of Big Tech stocks fell in premarket trading, with companies such as Apple and Nvidia having big exposure to China and Taiwan for manufacturing their products.
In Japan, one of US’ top trading partners, Prime Minister Shigeru Ishiba said the tariffs had created a “national crisis” as a plunge in banking shares on Friday set Tokyo’s stock market on course for its worst week in years.
US Secretary of State Marco Rubio on Friday disputed any economic crash, telling reporters that markets were reacting to the change and would adjust.
“Their economies are not crashing. Their markets are reacting to a dramatic change in the global order in terms of trade,” he said at a press conference in Brussels. “The markets will adjust.”
Federal Reserve chair Jerome Powell on Friday will add his voice to a growing debate at the central bank over whether the Trump administration’s new policies are more likely to stoke higher inflation or undercut growth and employment so much the Fed will have to respond.
Divisions and mixed signals
With European shares also heading for the biggest weekly loss in three years, the European Union’s trade commissioner Maros Sefcovic will speak to US counterparts.
“We will not shoot from the hip – we want to give negotiations every chance to succeed to find a fair deal, to the benefit of both sides,” he said on social media.
The EU is divided on how best to respond to Trump’s tariffs, including on use of its ‘Anti-Coercion Instrument’, which allows the bloc to retaliate against third countries that put economic pressure on EU members to change their policies.
Countries that are cautious about retaliating and thereby raising the stakes in the standoff with the US include Ireland, Italy, Poland and the Scandinavian nations.
French President Emmanuel Macron led the charge on Thursday by calling on companies to freeze investment in the US.
However, French Finance Minister Eric Lombard later cautioned against like-for-like countermeasures on the US tariffs, warning this would also rebound on European consumers.
“We are working on a package of responses that can go well beyond tariffs, in order, once again, to bring the US to the negotiating table and reach a fair agreement,” Lombard said in an interview with broadcaster BFM TV.
There were conflicting messages from the White House about whether the tariffs were meant to be permanent or were a tactic to win concessions, with Trump saying they “give us great power to negotiate.”
The US tariffs could jack up the price for US shoppers of everything from cannabis to running shoes to Apple’s iPhone. A high-end iPhone could cost nearly US$2,300 if Apple passes the costs on to consumers, based on projections from Rosenblatt Securities.
Businesses have raced to adjust. Automaker Stellantis said it would temporarily lay off US workers and close plants in Canada and Mexico, while General Motors said it would increase US production.
China is retaliating for Trump’s 54 per cent tariffs on imports from the world’s No 2 economy. The European Union faces a 20 per cent duty.
“Others have maybe learned their lessons (from Trump’s last term),” said Eddie Kennedy, head of Bespoke Discretionary Fund Management, Marlborough, London.
“They are fighting back and saying we can play the same game as you and we are more in a position of strength to negotiate.”
Other trading partners, including Japan, South Korea, Mexico and India, said they would hold off on any retaliation for now as they seek concessions. Britain’s foreign minister said it was working to strike an economic deal with the US.
Trump says the “reciprocal” tariffs are a response to barriers put on US goods, while administration officials said the tariffs would create manufacturing jobs at home and open up export markets abroad, although they cautioned it would take time to see results. REUTERS
