In early February 2025, US President Donald Trump signed an executive order imposing new duties on Chinese imports. All goods from China are now subject to a 10% tariff. The step was part of the Trump administration’s larger strategy of lowering the US trade deficit and ratcheting up pressure on Beijing over intellectual property and subsidizing industrial giants.
China’s response
China was quick to follow with its own retaliatory tariffs. It imposed 15% duties on US coal and liquefied natural gas, as well as 10% tariffs on oil, SUVs with engine capacity of 2.5 litres or more, agricultural machinery and some trucks. Collectively, these restrictions affected about $14bn worth of US exports to China. In addition, Beijing decided to impose export restrictions on rare metals such as tungsten, tellurium, bismuth, indium and molybdenum, which could seriously hit US high-tech industries.
Why did China impose duties specifically on these goods?
China’s decision to impose duties specifically on the US energy sector is explained by several reasons. First, US coal and liquefied natural gas make up a small share of China’s total imports, and can be substituted with Russian and Middle Eastern alternatives. Second, it complicates US electronics, aerospace and military manufacturers with export restrictions of rare earth metals, which provides leverage for the Washington in the further negotiation.
Prospects for conflict
Though the impact of these actions may take time to be felt, ultimately they will result in more expensive costs and disruptions along the supply chain. The possibility of a compromise between the parties remains unknown. On the one hand, China’s economy is experiencing slowing growth and declining demand for exports. On the other hand, some US firms are already suffering from increasing production costs and decreasing profits. In these circumstances, further escalation may be disadvantageous for both sides.