By Charles Switzer
8:48am PST, Feb 4, 2025
Renewed Trade War as China Strikes Back
The escalating trade tensions between the U.S. and China took a dramatic turn on Tuesday, February 4, as Beijing swiftly retaliated against President Donald Trump's latest tariffs. The Trump administration imposed an additional 10 percent tariff on all Chinese imports, citing China's failure to curb the flow of illicit drugs, particularly fentanyl into the U.S.In response, China hit back with tariffs of 15 percent on U.S. coal and liquefied natural gas (LNG) and 10 percent on crude oil, farm equipment and certain automobiles. Beijing's Finance Ministry announced that these new tariffs on American exports will take effect on February 10.
Here is everything you need to know about China's "retaliatory" reaction to Trump's measures.
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China Files WTO Complaint and Targets U.S. Tech and Trade
China has taken its fight to the World Trade Organization (WTO), formally filing a complaint against the U.S., calling the tariffs "malicious." Additionally, China has launched an antitrust investigation into Google and placed two American companies, PVH Corp (the parent company of Calvin Klein) and biotechnology firm Illumina on its "unreliable entity list."The Commerce Ministry accused these firms of taking "discriminatory measures against Chinese enterprises," escalating the economic conflict beyond just tariffs.
The Chinese government also announced export controls on critical rare earth materials, including tungsten and molybdenum which are essential for U.S. technology and clean energy production.
Market Reactions and Economic Concerns Grow
The financial markets reacted swiftly to the latest developments. Hong Kong stocks pared gains, the Chinese yuan weakened and the U.S. dollar strengthened amid fears of prolonged economic instability.Economists have expressed concern over the long-term impact of the trade war. Gary Ng, senior economist at Natixis in Hong Kong, warned: "Unlike Canada and Mexico, it is clearly harder for the U.S. and China to agree on what Trump demands economically and politically."
Ng further emphasized that tariffs could become a recurrent issue, leading to continued market volatility throughout the year.
Trump's Ultimatum on Fentanyl and Future Tariff Hikes
President Trump doubled down on his rhetoric against China, stating that unless Beijing takes stronger action to halt the flow of fentanyl into the U.S. tariffs on Chinese goods could rise even further."China hopefully is going to stop sending us fentanyl, and if they're not, the tariffs are going to go substantially higher," the president warned.
However, China has repeatedly rejected responsibility for the U.S. opioid crisis, stating that it is "America's problem." Despite the heightened tensions, Beijing left the door open for continued trade negotiations, signaling the possibility of future agreements.
Global Trade Fallout and Future Tariff Battles
As the U.S.-China trade war reignites, Trump has hinted that his next trade target could be the European Union. Over the weekend, he suggested that the 27-nation bloc should brace for potential tariffs, though no timeline was provided.EU leaders, meeting in Brussels, warned they are prepared to retaliate if necessary emphasizing their preference for negotiations.
Meanwhile, Trump indicated that Britain, which left the EU in 2020 might be exempt from future trade penalties. Despite acknowledging that tariffs could cause short-term economic pain for U.S. consumers, Trump defended his policies arguing that they are necessary to combat narcotics trafficking, curb immigration and boost domestic manufacturing.