Beijing has taken action following days of warnings and appeals for negotiations with Washington. The decision involves imposing a 15% tariff on coal and liquefied natural gas, along with a 10% tariff on crude oil, agricultural machinery, and large-engine cars from the US starting on February 10.
The significance of the chosen date provides a window for the world's top two economies to step back from the brink of a possible trade war. Despite this move, there are indications that China remains open to dialogue, with both leaders scheduled for a call later in the week.
China's response appears measured compared to President Trump's broad 10% tariff on all Chinese imports. China’s trade reliance on the US is limited, given its reduced role in American exports. Speculation suggests Beijing’s targeted tariffs may be an initial bargaining strategy rather than a definitive stance.
Given the cordial start to US-China relations during Trump's tenure and China's focus on stabilizing its own economy, both leaders have historical familiarity with such negotiations, though past tensions linger. The forthcoming dealings are anticipated to be more challenging than previous agreements with Mexico and Canada, with the extent of Trump’s demands pivotal for any accord with Beijing.
Notably, China's economic prowess and diversified trade partnerships have bolstered its confidence, signaling potential resistance if faced with excessive demands from Trump. With China's reduced dependence on external trade relative to past decades, it could weather the current 10% tariff impact but must strategize for potential escalations.
The past trade deal between the US and China turned contentious with reciprocal tariffs on billions of goods, resolving only with Chinese commitments to increase US imports by $200bn annually. However, hindered by the pandemic, the persisting trade imbalance poses a challenge to future negotiations.
China's surplus in trade with the US raises concerns regarding Beijing’s options, having exhausted traditional tariff responses during Trump's initial term. Analysts suggest China may explore diverse strategies beyond tariffs for potential retaliation if tensions escalate.
As the scenario unfolds, global industries await developments as the two leaders engage in further discussions later in the week, amid apprehension about the looming specter of a full-blown trade war.