Trade War

Newsletter 254 - April 6, 2025

Welcome to the 254th edition of Trade War.

China strikes back hard announcing 34% retaliatory tariffs on all US imports, as well as a host of other punitive measures. Beijing extends curbs to 7 more rare-earth elements. And Chinese regulators slow approval for companies investing in US.

Wholesale trade, computers and electronics, chemicals and pharmaceuticals, autos, and semiconductors are most exposed American industries in China. And agriculture groups send letter on trade war worries to four cabinet secretaries.

Trump ends de minimis exemption for goods from China and Hong Kong, a loophole that allowed tariff-free imports worth under $800. Temu and Shein are not going to be as cheap as they once were. And China’s state press publishes crude cartoons calling Taiwan president Lai Ching-te a “parasite courting ultimate destruction.”

Notable/In depth ~

• Xi’s policy slogans suggest more Chinese overcapacity coming

• “Trump cannot come close to offering [Putin] as much as Xi does,” write Michael McFaul and Evan Medeiros

• Tariff disruptions can hurt jobs, says WardsAuto

China hits back hard at US tariffs

China struck back hard Friday announcing 34 percent retaliatory tariffs on all U.S. imports, as well as a host of other punitive measures, in response to Trump’s tariffs.

“China urges the United States to immediately cancel its unilateral tariff measures and resolve trade differences through consultation in an equal, respectful and mutually beneficial manner.” the State Council said (Chinese).

In addition to the tariffs set to take effect on April 10, Beijing added 11 American companies including drone maker Skydio to its “unreliable entities list” and put 16 more U.S. entities involved in the defense, aerospace, and logistics industries on its export control list.

China also imposed controls on seven more rare-earth elements including dysprosium, gadolinium, samarium, scandium, and terbium, launched an anti-dumping investigation into U.S. biotech giant DuPont, and hit American agricultural firms, banning sorghum from exporter C&D (USA) Inc. and putting import restrictions on poultry and bonemeal exporters.

Beijing’s response was an “eye for an eye,” says Lynn Song, chief economist for Greater China at ING. It “[shows] that China is not willing to enter into further negotiations from a position of weakness,” he added.

“CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!” Trump wrote in all caps on Truth Social.

If Trump really believes China is panicking rather than instead showing their readiness to wage trade war, he is in for a rude surprise. Beijing has been preparing for this day for a long time, including by strengthening legislation to punish foreign firms and diversifying its reliance on agricultural goods and other essential products.

“Anyone expecting President Xi to come calling and seek a call with President Trump following [the] April 2 tariff announcement is being dangerously naive. Anyone advising Trump that Xi will beg for forgiveness is committing malpractice. That is not the mood or the plan in Beijing now,” writes Brookings scholar Ryan Hass.

Beijing has “no fear of trouble”

“Under the guise of pursuing ‘reciprocity’ and ‘fairness,’ the United States is engaging in zero-sum games and, in essence, seeking ‘America First’ and ‘American exceptionalism,’” the Chinese government said in a statement, reports the state Xinhua News Agency.

“Recently, under various pretexts, the United States has imposed tariffs on all trading partners, including China, which severely infringes upon the legitimate rights and interests of nations, severely violates World Trade Organization rules, severely harms the rules-based multilateral trading system, and severely disrupts the stability of the global economic order. The Chinese government strongly condemns and firmly opposes this.”

“Such actions will inevitably face widespread opposition from the international community," it noted.

“We don't make trouble, but we have no fear of trouble,” the Chinese government added.