China announced on Friday that it will impose 34% tariffs on all imports from the United States starting April 10. This move directly responds to US President Donald Trump’s recent decision to levy an additional 34% tariff on all Chinese goods imported into the US. The Chinese State Council Tariff Commission condemned the US tariffs as “unilateral bullying practices” that violate international trade rules and undermine China’s legitimate rights and interests.
Since taking office in January, Trump has already applied two rounds of 10% tariffs on Chinese imports, which the White House argued was necessary to combat the flow of illicit fentanyl from China to the US. These tariffs, combined with pre-existing ones, now result in some Chinese goods facing duties exceeding 54%. Beijing’s latest response is significantly broader than previous measures, which focused on targeted US imports like agricultural products and fuel.
This time, China has included a variety of American firms and imposed export controls on critical rare-earth minerals. Leah Fahy, a China economist at Capital Economics, described the situation as “a significant escalation” and noted that Chinese President Xi Jinping appears confident in the resilience of China’s economy against potential future actions from the US. US market indices reacted negatively to the news.
China responds to US tariffs
The Dow fell more than 1,000 points (2.7%), the S&P 500 dipped more than 3%, and the Nasdaq Composite lost 3.5%. European and UK stocks also fell, marking their worst performance in years.
Secretary of State Marco Rubio acknowledged the market turmoil but assured that markets would eventually adjust once they understand the new trade rules. China’s measures are carefully targeted, affecting politically sensitive sectors like agriculture and industrial goods while still attempting to keep its broader economy open. The timing of China’s tariff announcement coincided with the country’s Tomb Sweeping Festival, further highlighting the symbolic significance of the action.
Economists warn that these developments could cut significantly into China’s economic growth for the year. Larry Hu, chief China economist at Macquarie Group, estimates the current escalation could reduce China’s growth by up to 2.5 percentage points. The broader repercussions of this trade war include potential global economic slowdowns and challenges for businesses that rely on interconnected supply chains.
To offset the negative impacts of these tariffs, Beijing may need to implement measures to boost domestic demand.
