Minutes after Donald Trump’s tariffs on China came into force on Tuesday, China’s government announced its own retaliatory tariffs.
The Chinese tariffs focus on a range of sectors – big tech, energy, cars, farming, and fashion – but with some specific targets. China’s finance ministry said it would impose levies of 15% for US coal and liquid natural gas and 10% for crude oil, farm equipment and large displacement vehicles and pickup trucks. Some high-profile US companies were also put under investigation or blacklisted.
Some of China’s measures appear to have limited impact. The US is the biggest exporter of LNG globally, but it does not export much to China. Nor did it send over much crude oil, said Anne Stevenson-Yang, a co-founder of J Capital Research and author on China’s economy.
“The other sectors are just targeted at particular states,” she said, in reference to the agricultural and automotive tariffs. “The goal here is political theatre rather than a particular goal.”
But China also put strict export controls on tungsten, tellurium, molybdenum and ruthenium – materials that are essential for advanced technologies, clean energy, and national security, according to the Australian National University.
At a panel discussion on Monday, Philip Luck, an economist at the Center for Strategic and International Studies and former state department official, noted the US’s dependence on China for a lot of critical minerals. “So … they could put some significant harm on our economy.”
China controls much of the world’s supply of the rare earth metals that are critical for the clean energy transition, including about 80% of the world’s tungsten and bismuth supply. The controls were in order to “safeguard national security interests”, the ministry said. It’s likely these controls were military-minded.
Luke Adriaans, a research analyst at the consultancy Project Blue, told Bloomberg: “The industries most likely to be affected include the defence sector, where tungsten is a crucial material for munitions manufacturing.”
In tech, Google’s China operations are now the target of an investigation into alleged antitrust violations, announced by the Chinese State Administration for Market Regulation on Tuesday.
The reasons were unclear. Google products, including its search engine, are blocked in China, although it works with local partners. In 2011, Google abandoned its Chinese-language search engine in the mainland and transferred it to Hong Kong. By 2014, China had blocked the last remaining way to access Google’s email service, Gmail.
Also targeted was Illumina Inc, a biotech company specialising in genomic sequencing, which recently partnered with Nvidia – itself targeted with apparently retaliatory antitrust investigations last year – on health-related AI tech. On Tuesday it was added to China’s unreliable entities list, meaning it was likely to face fines, and restrictions on sales and investments in China.
The announcement by China’s commerce department did not give specifics, only accusing the company of having “violated normal market trading principles, interrupted normal transactions with Chinese companies, adopted discriminatory measures against Chinese companies, and seriously damaged the legitimate rights and interests of Chinese companies”.
China is said to account for 8.5% to 10% of Illumina’s revenue.
“These are major US companies but not the most critical to US interests in China,” Ilaria Carrozza, a senior researcher at the Peace Research Institute Oslo (PRIO), told the Guardian. “I would suspect that China wants to signal its ability to retaliate without escalating the trade war to a more damaging level.”
The addition of the US clothing company PVH Group, which owns brands including Tommy Hilfiger and Calvin Klein, to the entities list appeared to have a clearer narrative.
The ministry had already launched an investigation in September, exploring the company’s addition to the list over allegations of “discriminating against Xinjiang” by refusing to use cotton from the region. Many companies have stopped sourcing cotton from Xinjiang, where there are allegations of forced labour against the ethnic Uyghur population. In 2019 PVH added Xinjiang to its “restricted jurisdictions policy”. “We do not, and prohibit our licensees from, producing finished goods in Xinjiang,” it said.
However it’s still unclear why PVH – which drew just 6% of its 2023 revenue from China sales – has been specifically targeted, since many companies have withdrawn their supply chains from Xinjiang, particularly after the introduction of the 2021 Uyghur Forced Labor Prevention Act, which generally bans products from Xinjiang being imported into the US.
Carozza said it was hard to know what the reasoning behind any of the choices truly was, but it seemed China was holding its fire somewhat. Going after more critical industries or financial institutions could have prompted more severe responses and disrupted supply chains that China also depends on.
“In this way, Beijing can apply pressure on the US without triggering an uncontrollable economic confrontation.”
Additional research by Jason Lu
