BEIJING – US President Donald Trump has followed through on his promise to wield the United States’ vast economic weight to hit back at China for its alleged unfair trade practices and role in America’s deadly fentanyl crisis.
He said on Feb 1 Chinese exports to the US would be subject to an additional 10 per cent tariff in addition to the various rates of duties they already face.
China hit back on Feb 2, saying it “firmly opposes” the move and would take “corresponding countermeasures to resolutely safeguard” its interests.
Here’s where the China-US trade relationship stands:
How much trade is at stake?
Trade between China and the United States – the world’s two largest economies – is vast, totalling more than US$530 billion (S$719 billion) in the first 11 months of 2024, according to Washington.
Over that same period, sales of Chinese goods to the US totalled more than US$400 billion, second only to Mexico.
According to the Peterson Institute of International Economics (PIIE), China is the dominant supplier of goods from electronics and electrical machinery to textiles and clothing.
But a yawning trade imbalance – US$270.4 billion for January to November 2024 – has long raised hackles in Washington.
So has China’s vast state support for its industries, sparking accusations of dumping, as well as its perceived mistreatment of US firms operating in its territory.
But China’s economy remains heavily reliant on exports to drive growth despite official efforts to raise domestic consumption – making its leaders reluctant to change the status quo.
What happened during Mr Trump’s first term?
Mr Trump stormed into the White House in 2016 vowing to get even with China, launching a trade war that slapped significant tariffs on hundreds of billions of dollars of Chinese goods.
China responded with retaliatory tariffs on US products, particularly affecting American farmers.
Key US demands were greater access to China’s markets, broad reform of a business playing field that heavily favours Chinese firms and a loosening of heavy state control by Beijing.
After long, fraught negotiations, the two sides agreed to what became known as the “phase one” trade deal – a ceasefire in the nearly two-year-old trade war.
Under that agreement, Beijing agreed to import US$200 billion worth of US goods, including US$32 billion in farm products and seafood.
But in the face of the Covid-19 pandemic and a US recession, analysts say Beijing fell well short of that commitment.
“In the end, China bought only 58 per cent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war,” PIIE’S Mr Chad Brown wrote.
“Put differently, China bought none of the additional US$200 billion of exports Trump’s deal had promised.”
How did things change under Mr Biden?
Mr Trump’s successor, Mr Joe Biden, did not roll back increases imposed by his predecessor, but took a more targeted approach when it came to tariff hikes.
Under Mr Biden, Washington expanded efforts to curb exports of state-of-the-art chips to China – part of a broader effort to prevent sensitive US technologies being used in Beijing’s military arsenal.
His administration also used tariffs to take aim at what it called China’s “industrial overcapacity” – fears the country’s industrial subsidies for green energy, cars and batteries could flood global markets with cheap goods.
Last May, Mr Biden ordered tariffs on US$18 billion worth of imports from China, accusing Beijing of “cheating” rather than competing.
Under the hikes, tariffs on electric vehicles quadrupled to 100 per cent, while the tariff for semiconductors surged from 25 to 50 per cent.
The measures also targeted strategic sectors such as batteries, critical minerals and medical products.
Both sides have also launched investigations into the others’ alleged unfair trade practices with probes into dumping and state subsidies.
What happens next?
Mr Trump’s announcement on Feb 1 showed his long-threatened tariff hikes were serious and not an opening gambit in negotiations.
The mercurial magnate has also tied tariffs to the fate of Chinese-owned social media app TikTok, warning of retaliation if a deal cannot be struck to sell it.
But Beijing’s strong riposte has left little doubt that it will push back against measures it has long viewed as unfair.
The Chinese Commerce Ministry has vowed “corresponding countermeasures to resolutely safeguard our own rights and interests”, without saying what form they will take.
It has also said it will take its case against Mr Trump’s tariffs to the World Trade Organisation, though that is unlikely to bring change in the short term.
More immediate is the threat by Beijing’s Foreign Ministry that the duties “will inevitably affect and damage future bilateral cooperation on drug control”.
That casts a new shadow over counter-narcotics talks that resumed after Mr Biden met Chinese President Xi Jinping in San Francisco in 2023.
A US-China working group later said it would step up regulation of three key fentanyl precursors, though it is not clear how much success has been achieved. AFP
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