China Retaliates Against Trump’s New Tariffs
U.S. and China impose new tariffs in a renewed economic standoff. (Photo: Claudine Hellmuth/POLITICO)
China has announced retaliatory tariffs following U.S. President Donald Trump’s decision to impose a 10% tariff on all Chinese imports. On Feb. 4, 2025, China's Ministry of Finance announced additional tariffs on select U.S. goods, set to take effect on Feb. 10, 2025. The measures include 15% tariffs on U.S. coal and liquefied natural gas (LNG) and 10% tariffs on crude oil, agricultural machinery, and large-engine vehicles. In addition to tariffs, China has tightened export controls on critical minerals essential for high-tech industries, including tungsten, tellurium, bismuth, indium, and molybdenum. These materials are vital for semiconductor and EV industries, and export restrictions could lead to supply chain disruptions, including delays, price increases, and supply bottlenecks. China has also added two U.S. companies to its Unreliable Entity List, which can lead to restrictions on trade activities and future investments. Additionally, China has launched an antitrust investigation into U.S. tech giant Google.
China’s tariffs target $14 billion in U.S. imports, a fraction of the $525 billion in Chinese goods affected by Trump’s tariffs, according to a Goldman Sachs estimate. While smaller in scale, China’s countermeasures focus on high-value industries like energy and machinery, signaling a targeted response rather than broad escalation. Beijing’s strategy also includes regulatory pressure, such as a potential delay in Tesla’s Full Self-Driving (FSD) approval, indirectly pressuring Trump through Tesla CEO Elon Musk, a key advisor.
For the U.S., Trump’s 10% tariff on Chinese imports is expected to increase costs for manufacturers and consumers, particularly in electronics and automotive industries that rely on Chinese components. Analysts project the tariffs will generate $106.1 billion in federal tax revenue in 2025, but the burden will largely fall on businesses and consumers through higher prices, with some estimates predicting a 0.8% decline in after-tax incomes. The tariff hike will also push the average U.S. import tariff above 7%, marking its highest level in over 50 years.
China’s shift away from U.S. energy imports has accelerated since the 2018-19 trade war, with increased reliance on Australia, Russia, the Middle East, and Africa. However, transitioning to new suppliers comes with short-term cost increases, particularly in liquefied natural gas (LNG), where shipping logistics and long-term contracts complicate price stability. In the coal sector, the 15% tariff on U.S. coal imports is likely to reshape global coking coal markets, forcing China to boost imports from Australia and Canada. This realignment could heighten competition and push global prices higher, affecting both supply chains and China’s steel industry.
Meanwhile, the U.S. remains a critical market for Chinese exports, particularly in electronics, machinery, and textiles. Reduced access to the U.S. market is hurting factory output and employment in key Chinese manufacturing hubs. To offset losses, Chinese exporters are pivoting toward alternative markets in Asia, Africa, and Latin America, but these regions present challenges such as smaller consumer bases and lower purchasing power. Increased competition among Chinese firms has led to price wars and thinner profit margins, particularly in industrial goods and seasonal exports. For instance, aluminum producers have slashed prices to stay competitive while smaller firms, like Christmas decoration manufacturers, struggle to retain profitability and sustain their workforce.
China’s reduced energy imports from the U.S. and its declining exports to the U.S. are forcing economic adjustments on both fronts. While energy realignment brings short-term cost hikes and market shifts, China’s export pivot exposes its manufacturers to competitive pressures and lower margins in emerging markets.
While China faces economic costs, the U.S. bears greater political consequences. Trump’s renewed protectionist agenda not only escalates tensions with China but also strains relations with key allies, potentially pushing the European Union, Latin America, and Africa closer to Beijing. In response, China is positioning itself as a counterweight to U.S. protectionism, strengthening economic ties within BRICS and expanding Belt and Road Initiative (BRI) partnerships. While Trump has shown a willingness to pressure Western Hemisphere allies through tariffs and military threats, overplaying this strategy could backfire. If Latin American nations see U.S. coercion as a long-term constraint on their policy autonomy, they may diversify alliances and seek alternative economic partners, further weakening U.S. influence in the region.