China has responded to US President Donald Trump’s latest tariffs with a series of measures, including duties on all American goods and export controls on rare earth minerals, dealing another blow to global markets. President Xi Jinping’s government will impose a 34% tariff on all imports from the US starting April 10, matching the level of Trump’s so-called reciprocal tariffs on Chinese products.
Beijing Announces Countermeasures
Chinese authorities announced several additional measures including:
- Immediate restrictions on exports of seven types of rare earth minerals
- Launching anti-dumping investigations into medical CT X-ray tubes from the US and India
- Halting imports of poultry products from two American companies
- Adding 11 American defense companies to an unreliable entity list
Market Reaction
S&P 500 futures fell 3% and Europe’s stock benchmark erased all gains for the year. Treasury bonds surged further, with the yield on 10-year bonds dropping 15 basis points to 3.88%. In commodities, soybeans fell as much as 2% in Chicago to the lowest level since early March, while wheat and corn dropped more than 1%.
Escalation of Trade Tensions
Tensions between the world’s largest economies have significantly worsened since Trump’s return to the White House. The US president has yet to speak with his Chinese counterpart more than two months after his inauguration. Both countries are at an impasse over China’s alleged role in the flow of fentanyl into America, which Trump cited as a reason for the previous two rounds of tariffs.
China’s Strategic Response
“The speed with which the countermeasures were implemented demonstrates a high level of deliberation and a set of appropriate responses to US retaliation,” said Dylan Loh, assistant professor at Nanyang Technological University in Singapore. China’s decision to take retaliatory action even before US tariffs take effect on April 9 represents a shift from its previous wait-and-see approach.
The TikTok Battle
This move also comes just ahead of the April 5 deadline for Beijing-based TikTok owner ByteDance Ltd. to find a non-Chinese buyer or face a US ban. Trump on Thursday reiterated his willingness to offer tariff relief if China approves the sale of TikTok’s US operations. By acting now, China may be attempting to strengthen its position in any future negotiations.
Rare Earth Minerals as Strategic Weapons
China is once again leveraging its dominance in the supply chain of rare metals and earth minerals to retaliate against US tariffs. Beijing announced restrictions on the export of seven key rare earth elements including samarium for optical lasers, gadolinium for MRI examinations, terbium for display devices, and dysprosium for magnets in wind turbines and electric vehicles. China stated that the restrictions would take effect immediately because “the relevant items have dual-use attributes.”
Economic Impact
Economists expect Trump’s tariffs to reduce China’s annual economic growth by approximately two percentage points. Nevertheless, Chinese stocks showed only a slight decline on Thursday before the holiday, with investors betting that Xi will release sufficient monetary and fiscal stimulus to achieve the ambitious growth target of around 5% in 2025.
Seeking Balance
The latest measures reflect China’s message to the Trump administration that both sides are equal and Beijing will not simply submit. At the same time, China leaves room for compromise, as its retaliation appears to be “proportional and targeted, focusing mainly on agricultural goods and defense contractors,” according to Wen-Ti Sung from the Atlantic Council’s Global China Hub. “Both are key voters in Trump’s coalition.”
