Photo credit: www.bbc.com
Trade Tensions Escalate as China Responds to U.S. Tariffs
The ongoing trade dispute between the United States and China has intensified, with Beijing retaliating against U.S. tariffs with its own set of measures targeting specific American goods. This escalation follows a 10% tariff on all Chinese imports that was implemented by the Trump administration.
As a response, Chinese authorities have announced import taxes, affecting a range of goods including coal, liquefied natural gas (LNG), and crude oil. Despite these measures, analysts suggest that the overall impact may be limited due to China’s diverse sourcing options and the relatively small share of U.S. imports in its overall trade.
Impact on Fossil Fuels
Beijing’s countermeasures include a 10% tariff on U.S. coal and LNG, along with a 15% tax on crude oil imports. China stands as the largest global importer of coal, but its purchases largely stem from Indonesia, Russia, Australia, and Mongolia, rather than the U.S. Notably, while LNG imports from the U.S. have grown significantly since 2018, they still constitute only a minor portion of China’s total fossil fuel acquisitions.
Rebecca Harding, a trade economist at the Centre for Economic Security, has indicated that China can readily find alternative suppliers, particularly from Russia, where it has been purchasing oil at reduced prices. Meanwhile, the U.S. maintains its position as the largest exporter of LNG, with ample demand from other markets, notably within the European Union.
Tariffs on Agricultural and Automotive Imports
In addition to fossil fuels, China has implemented a 10% tariff on agricultural machinery, pick-up trucks, and larger cars sourced from the U.S. However, given China’s limited imports of American pick-ups and its reliance on European and Japanese vehicles, the impact on consumers is expected to be minimal. The Chinese government has been investing in domestic agricultural machinery production to bolster food security, suggesting that these tariffs may also serve to promote local industry.
According to Julian Evans-Pritchard, head of China economics at Capital Economics, the goods affected by these tariffs represent only about $20 billion annually—roughly 12% of China’s total imports from the U.S.—compared to the more than $450 billion of Chinese goods subject to American tariffs.
Non-Tariff Measures and Investigations
China has also initiated non-tariff measures, including an anti-monopoly investigation into Google, a major U.S. technology firm whose search services have been prohibited in China since 2010. While Google has maintained a presence through apps and local collaborations, China accounts for merely 1% of its global sales, indicating that a full withdrawal would not significantly harm the company.
Designation as “Unreliable Entities”
Another notable development is China’s designation of PVH Corp., the owner of brands like Calvin Klein and Tommy Hilfiger, to its “unreliable entity” list due to perceived discriminatory practices against Chinese companies. This designation may complicate PVH’s operations within China, imposing potential penalties and investigations into their business practices, as highlighted by Andreas Schotter, a professor of international business.
Export Controls on Rare Metals
In a broader response, China has introduced export controls on 25 rare metals critical for various industries, including electronics and military applications. With China producing nearly 90% of the world’s refined output of these metals, this move could have significant implications for global supply chains.
Interestingly, the export controls do not extend to certain critical metals that China imports from the U.S., which are integral to high-tech applications such as semiconductors and aerospace technology. As the trade landscape continues to evolve, both countries are likely to navigate the complexities of this ongoing economic rivalry.
Source
www.bbc.com