China announced retaliatory tariffs on select American imports and an antitrust investigation into Google on Tuesday, just minutes after a sweeping levy on Chinese products imposed by U.S. President Donald Trump took effect.
American tariffs on imports from Canada and Mexico were also set to go into effect Tuesday before Trump agreed to a 30-day pause, as the two countries acted to address his concerns about border security and drug trafficking. Trump planned to talk with Chinese President Xi Jinping in the coming days.
“It is being scheduled and will happen very soon,” White House Press Secretary Karoline Leavitt said Tuesday.
This isn't the first round of tit-for-tat actions between the two countries. China and the U.S. engaged in an escalating trade war in 2018, when Trump repeatedly raised tariffs on Chinese goods and China responded each time.
This time, analysts said, China is much better prepared, announcing a slew of measures that go beyond tariffs and cut across different sectors of the U.S. economy. The government is also more wary of upsetting its own fragile and heavily trade-dependent economy.
“It’s aiming for finding measures that maximize the impact and also minimize the risk that the Chinese economy may face,” said Gary Ng, a senior economist at Natixis Corporate and Investment Banking in Hong Kong. "At the same time ... China is trying to increase its bargaining chips.”
John Gong, a professor at the University of International Business and Economics in Beijing, called the response a "measured” one. “I don’t think they want the trade war escalating,” he said. “And they see this example from Canada and Mexico and probably they are hoping for the same thing.”
Counter-tariffs
China said it would implement a 15% tariff on coal and liquefied natural gas products as well as a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the U.S. The tariffs would take effect next Monday.
“The U.S.’s unilateral tariff increase seriously violates the rules of the World Trade Organization," China's State Council Tariff Commission said in a statement. "It is not only unhelpful in solving its own problems, but also damages normal economic and trade cooperation between China and the U.S.”
The WTO confirmed Tuesday it received notice of China’s request for consultations with the United States regarding the tariffs imposed on Chinese goods. The move sets off a 60-day period for the two sides to resolve their differences, and if not, the case can be brought before a three-judge panel at the Geneva-based trade body.
However, the WTO’s dispute-resolution process has been stymied in recent years as multiple U.S. administrations blocked appointments of judges on its appeals court.
China reiterates warning of retaliation over US tariffs
The impact of China's measures on U.S. exports may be limited. Though the U.S. is the biggest exporter of liquid natural gas globally, it does not export much to China. In 2023, the U.S. exported 173,247 million cubic feet of LNG to China, about 2.3% of its total natural gas exports, according to the U.S. Energy Information Administration.
China imported less than 110,000 vehicles from the U.S. last year, though auto market analyst Lei Xing thinks the tariffs will be painful for GM, which is adding the Chevrolet Tahoe and GMC Yukon to its China line-up, and for Ford, which exports the Mustang and F-150 Raptor pickup.
The response from China appears calculated and measured, said Stephen Dover, chief market strategist and head of the Franklin Templeton Institute, a financial research firm. However, he said, the world is bracing for further impact.
“A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower GDP growth everywhere, higher U.S. inflation, a stronger dollar and upside pressure on U.S. interest rates,” Dover said.
Further export controls on critical minerals
China announced export controls on several elements critical to the production of modern high-tech products. The measure took effect upon announcement on Tuesday.
They include tungsten, tellurium, bismuth, molybdenum and indium, many of which are designated as critical minerals by the U.S. Geological Survey, meaning they are essential to U.S. economic or national security that have supply chains vulnerable to disruption.
The export controls are in addition to ones China placed in December on key elements such as gallium.
“They have a much more developed export control regime," Philip Luck, an economist at the Center for Strategic and International Studies and former State Department official, said at a panel discussion on Monday.
“We depend on them for a lot of critical minerals: gallium, germanium, graphite, a host of others,” he said. "They could put some significant harm on our economy.”
Going after Google
China’s State Administration for Market Regulation said Tuesday it is investigating Google on suspicion of violating antitrust laws. The announcement did not mention the tariffs but came just minutes after Trump’s 10% tariffs on China were to take effect.
It is unclear how the probe will affect Google’s operations. The company has long faced complaints from Chinese smartphone makers over its business practices surrounding the Android operating system, Gong said.
Overall, Google has a smaller presence in China than many markets, with its search engine blocked like many other Western platforms. Google exited the Chinese market in 2010, after refusing to comply with censorship requests from the Chinese government and following a series of cyberattacks on the company.
Trump imposes tariffs on Canada, Mexico and China, spurring prospect of inflation and trade conflict
Google did not immediately comment.
Tommy Hilfiger in the crosshairs
The Commerce Ministry also placed two American companies on an unreliable entities list: PVH Group, which owns Calvin Klein and Tommy Hilfiger, and Illumina, which is a biotechnology company with offices in China. The listing could bar them from engaging in China-related import or export activities and from making new investments in the country.
The ministry says investigations show these two U.S. companies have “disrupted normal business with Chinese companies, taken discriminatory measures against Chinese companies and severely harmed the legitimate rights of Chinese companies”
Beijing began investigating PVH Group in September last year over “improper Xinjiang-related behavior” after the company allegedly boycotted the use of Xinjiang cotton.
Illumina competes with the Chinese biotech firm BGI in gene-sequencing.
In a statement, Illumina said it has a long-standing presence in China and that it complies with all laws and regulations wherever it operates. “We are assessing this announcement with the goal of finding a positive resolution,” the company said.
Putting these U.S. companies on the unreliable entities list is “alarming" because it shows that the Chinese government is using the list to pressure U.S. companies to take a side, said George Chen, managing director for The Asia Group, a Washington D.C.-headquartered business policy consultancy.
“It's almost like telling American companies, what your government is doing is bad, you need to tell the government that if you add more tariffs or hurt U.S.-China relations at the end of the day it'll backfire on American companies,” Chen said.