In a significant escalation of the trade war between the U.S. and China, China raised its retaliatory tariff against the U.S. to 84%, just hours after new American tariffs took effect.
Key Points
- China raised its retaliatory tariff against the U.S. to 84%, escalating the trade war, after the U.S. lifted its new tariffs on China to a total of 104%.
- China criticized the U.S. for violating trade agreements, filed a lawsuit against the new U.S. tariffs at the World Trade Organization, and added American entities to its export control and unreliable entity lists.
- Despite the escalating tensions, both countries seem to be leaving the door open for potential negotiations, with China calling for dialogue and the U.S. urging China to come to the table.
The U.S. had lifted its new tariffs on China to a total of 104%, including a 20% tariff to counter narcotics flows, a 34% “reciprocal” tariff, and a 50% additional levy. China’s tariff commission criticized the U.S. escalation and urged the U.S. to cancel all unilateral tariff measures.
U.S. Treasury Secretary Scott Bessent condemned China’s response. China also added 12 American entities to its export control list, six companies to its unreliable entity list, and filed an additional lawsuit against the new U.S. tariffs at the World Trade Organization. The trade war has become a central issue after Trump imposed reciprocal tariffs on about 60 countries. While some countries have sought to reduce the tariffs through engagement with Washington, China has retaliated strongly.
Despite the tense situation, experts believe that China is leaving the door open for potential negotiations. However, the damage to both countries’ economies is expected to become visible soon. Chinese authorities have sought to shore up confidence and vowed to unveil “new additional policies” to counter external uncertainties. Economists anticipate China’s central bank will lower interest rates and cut the reserve requirement ratio for banks in the coming weeks. However, these measures may not fully offset the tariff shocks.
The U.S. and China seem to be in a high-stakes game of chicken, with neither side willing to back down. Some observers expect further escalation, with China prepared to implement six measures in retaliation, including halting collaboration on fentanyl-related efforts and limiting U.S. agricultural exports.
