Beijing has responded to escalating trade tensions with Washington, announcing new tariffs on American imports in what appears to be a strategic but measured counterstrike.
China will impose a 15% tariff on coal and liquefied natural gas (LNG), alongside a 10% tariff on crude oil, agricultural machinery, and large-engine cars imported from the U.S. The new levies, set to take effect on February 10, leave a narrow window for diplomacy before the world’s two largest economies edge closer to a full-blown trade war.
A Calculated Move
The timing and scope of China’s retaliation suggest that Beijing is still open to negotiations. The White House has confirmed that U.S. and Chinese leaders are scheduled to hold talks later this week, indicating that diplomatic channels remain open despite the latest announcement.
While these tariffs target key U.S. exports, they are significantly less severe than the sweeping 10% tariff imposed by Washington on all Chinese goods entering the U.S. China’s response appears strategic rather than purely punitive, likely aimed at gaining leverage in upcoming discussions.
Why These Tariffs?
Despite being the world’s largest LNG exporter, the U.S. ships only about 2.3% of its LNG to China, meaning the new tariffs will have a limited immediate impact. Similarly, China’s major car imports primarily come from Europe and Japan, not the U.S.
By focusing on specific industries rather than issuing broad retaliatory measures, China may be signaling its willingness to negotiate rather than escalate.
Economic and Political Considerations
For President Xi Jinping, engaging in an all-out trade war with the U.S. could further strain China’s struggling economy. Beijing is already grappling with sluggish growth, a property market crisis, and weak consumer demand.
Meanwhile, U.S. President Donald Trump, who has prioritized economic decoupling from China, faces a more resilient and globally integrated Beijing than during his first term. China has expanded its trade partnerships, becoming the leading trade partner for more than 120 countries, and has steadily reduced its economy’s reliance on exports and imports.
Lessons from the Past
This latest standoff is reminiscent of the 2018 U.S.-China trade war, which saw both nations slap tariffs on hundreds of billions of dollars’ worth of goods. The dispute lasted more than two years, only ending when China agreed to purchase an additional $200 billion worth of U.S. goods in 2020.
However, the COVID-19 pandemic derailed that agreement, and the U.S. trade deficit with China now stands at $361 billion, according to Chinese customs data.
What’s Next?
The biggest concern for Beijing is whether Trump will increase tariffs further, potentially raising them to the 60% level he promised during his campaign. If Trump follows through, China may be forced to expand its retaliatory measures beyond tariffs, possibly targeting U.S. companies, technology exports, or financial markets.
With tensions escalating and the deadline fast approaching, global businesses and investors are closely watching to see if the two economic superpowers can find common ground before a new trade war erupts.
