China retaliated against escalating US tariffs for the second time in a month with targeted measures, including new tariffs on US agricultural goods and restrictions on trade with certain defense companies, a response seen as calibrated to avoid further escalation amidst growing global trade tensions initiated by the Trump administration, Bloomberg reports.
The move, announced Tuesday, follows the US doubling blanket tariffs on all Chinese exports. Beijing’s countermeasures strategically target goods the Asian nation can source from alternative countries, mitigating the potential blowback to its domestic economy.
Effective March 10, the new tariffs include a 15% duty on American food and agricultural products such as chicken and cotton, while soybeans, beef, and fruits face a 10% tariff, according to an announcement by the Ministry of Finance. This directly impacts crucial US agricultural exports to China, hitting American farmers as they approach the critical planting season. Soybeans, a significant export, saw nearly half of US shipments destined for China last year, with soybean futures falling some 0.6% in Chicago following the announcement.
Beyond tariffs, the Chinese Ministry of Commerce added 10 American companies, primarily in the defense sector, to its “unreliable entity list,” which also includes Illumina Inc. gene-sequencing machines and Calvin Klein owner PVH Corp., both added in February. Additionally, 15 firms, including defense contractors General Dynamics Land Systems and Skydio Inc., were placed on an export control list. While most of these companies likely conduct limited direct sales to China, the restrictions could significantly hinder their ability to procure essential parts and products made in China, which are crucial for the production of goods such as drones. Some of these firms were already subject to previous Chinese sanctions. China has also banned the import of Illumina Inc. gene-sequencing machines.
This response throws the onus back on the US, with President Trump’s upcoming review in April of Beijing’s compliance with the initial trade agreement adding urgency to the situation. Despite Trump indicating a desire to speak with President Xi Jinping early last month, a call has yet to occur since the US leader took office.
These latest trade salvos coincide with escalating global trade tensions. The US has also imposed tariffs on Mexico and Canada, and Trump is threatening further actions against the European Union and others. The Chinese government hit back hours after Trump signed an executive order for the hike, saying China had done too little to stop the flow of illicit fentanyl into the US. Later on Tuesday, Beijing released a white paper saying it strictly controls the production and export of the drug and its precursors.
Financial markets, however, largely remained stable, with Chinese stocks even climbing intraday. In the run-up to the deadline, though, US equities experienced their most significant tumble this year, Treasury note yields fell to a four-month low, and oil prices dropped to a three-month low. The Chinese yuan traded steadily.
The latest trade escalations come a day before Xi Jinping heads into the government’s most important political meeting of the year, where his lieutenants will unveil the economic blueprint for 2025.
China’s current countermeasures, including its response to a 10% tariff increase last month, appear more limited than during the height of the trade war in 2018 and 2019. During that period, Beijing imposed significant tariffs on key US farm products, leading to an almost 80% plunge in American soybean sales to China over two years, with Braz il taking much of that trade. The Chinese central bank also allowed the yuan to depreciate by 11.5% over that period, helping to offset some of the impact of US tariffs while fueling accusations of currency manipulation.
