China threatens countermeasures to combat Trump tariffs

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Beijing has hit out at new 10 per cent tariffs imposed by the US on Chinese exports, saying it will “take necessary countermeasures to defend its rights and interests” as trade tensions between the two powers enter a new phase.

The Ministry of Foreign Affairs said on Sunday that China opposed the tariffs, which it said were introduced “under the pretext of the fentanyl issue”.

“The US needs to view and solve its own fentanyl issue in an objective and rational way instead of threatening other countries with arbitrary tariff hikes,” the MFA said.

China’s Ministry of Commerce said it would file a lawsuit with the World Trade Organization.

The additional 10 per cent levies come alongside new 25 per cent tariffs on exports from Canada and Mexico, as President Trump embarks on an expanded trade war, following a range of measures imposed on China by the US during his first term.

Trump said the influx of “illegal aliens” and drugs, including the opiate Fentanyl, had created a “national emergency” that justified the tariffs.

During last year’s election campaign, he had warned of tariffs as high as 60 per cent against China, but subsequently signalled a rate of 10 per cent. He has linked the levies to the country’s role in the flow of ingredients or “precursors” for fentanyl.

China agreed to take actions to stem the flow of precursors at a summit between President Xi Jinping and then-president Joe Biden in San Francisco in November 2023. Since then, Beijing has taken some actions that were welcomed by the Biden administration, but critics, including some in the outgoing administration, wanted China to do much more.

Although widely anticipated, the measures pose a significant challenge to Xi Jinping’s government at a time when weaknesses in domestic demand have made it particularly dependent on exports for economic growth. Last year, China’s trade surplus hit a record high of close to $1tn.

Tao Wang, chief China economist at UBS Investment Bank, said the tariffs had been imposed more quickly than expected and that the blanket 10 per cent rate was more expansive than phased measures under Trump’s first administration.

“This is broader and likely much bigger than the first round,” she said, adding that many expected Trump to add more tariffs once his officials completed a review of trade policy in April.

Wang said she expected a hit to China’s GDP of 0.3 to 0.4 per cent.

In a report published last week, Morningstar said the 10 per cent tariffs would most affect home appliances, home furnishings, lithium batteries and electric vehicles in China. But it added many companies would “likely see an impact of less than 5 per cent of their respective total revenue” and that they “may not be as bad as feared for some industries”.

Beijing also faces trade tensions with the EU over tariffs imposed on its electric vehicles last summer, which have led to a wave of countermeasures on products from cognac to dairy.