Key Takeaways:
– China imposes tariffs on U.S. imports, a response in the escalating trade battle.
– Sarcastic bars affect $20 billion worth of U.S. goods or around 12 percent of total imports into China.
– Energy imports constitute over a third of the total, with crude oil, coal, and LNG worth more than $7 billion.
– China has also imposed export controls on rare metals and chemicals used in a variety of industries.
– Measures seem modest compared to U.S.’ 10 percent tariff on Chinese goods.
– Analysts believe Beijing’s move may be to signal retaliation capacity without causing considerable damage.
China’s Countermove in Trade War
China has escalated the ongoing trade war with the U.S., imposing new tariffs on a host of American imports. Majorly affected goods include items like crude oil, coal, cars, and even agricultural machinery. This move proves how serious the East Asian nation is about taking a stand in this trade dispute.
Impact of the Countermeasure
The latest tariffs imposed by China target about $20 billion worth of U.S. products annually. This figure translates to nearly 12 percent of America’s total annual exports to China. Analysts believe that these steps by Beijing may create some friction but have been intentionally kept low-key.
Energy imports take the brunt of this new policy. Based on Beijing’s custom data, last year saw imports of oil, coal, and LNG to the tune of $7 billion. Clearly, America’s energy sector has much at stake in this trade disagreement.
Tariffs on Rare Metals and Chemicals
China hasn’t restricted its retaliation to just energy products. The Asian Giant has slapped fresh export controls on rare metals and chemicals like tungsten, tellurium, bismuth, indium, and molybdenum. These elements are essential in multiple industries, including mining and phone screen manufacturing. With China holding a dominant position globally in the supply chains for rare metals, these export controls could have significant implications.
A Surprising Move or A Calculated Strategy?
While some analysts didn’t expect China to respond this early, there is a general consensus that the measures taken are fairly modest compared to U.S.’ tariffs. Capital Economics’ Julian Evans-Pritchard suggests that Beijing’s response has been carefully crafted. It is strong enough to send a message to the U.S., as well as domestic audiences but tries to avoid unnecessary damage.
China’s Dilemma
Despite retaliation, China’s capacity to engage in a full-scale trade war is limited due to its economic situation. The nation relies heavily on many U.S imports for its industries. Also, China can’t afford to impose burdensome trade barriers given the fragile state of its economy. Beijing recognizes the need to avoid reckless actions that could further destabilize its economy.
A Signal To Washington
The primary goal of China’s latest tariffs isn’t to cripple the American economy but to indicate retaliation capability. It’s a strategic move to show that China can withstand a prolonged economic conflict while pushing the U.S. to deal with internal economic pressures.
Potential for Serious Damage
Though the current measures may not cause severe damage, China, if it decides, can wield significant power over the U.S. America relies on China for critical minerals required for manufacturing electric vehicles, batteries, and an array of industrial applications.
Hope for Negotiations
Despite escalation, belief still remains that Beijing is open to negotiations. In the past, countries like Mexico and Canada have secured last-minute deals with the U.S., providing hope that a similar agreement could be reached with China. However, the question remains, will President Trump respond similarly to threats from China? If he pushes back, China could face a serious problem.
While the future is uncertain, one thing is for sure: this escalating trade conflict is far from being resolved and has the potential to shape the global economy in significant ways.