China Responds to U.S. Tariffs with Trade Barriers and Google Investigation

China has retaliated against President Donald Trump’s tariffs on Chinese imports by imposing its own tariffs on select U.S. goods and launching an antitrust investigation into Google. The move comes as part of broader economic measures aimed at countering the latest trade restrictions imposed by the U.S. government.

US Tariff Actions and China’s Countermeasures

While U.S. tariffs targeting Chinese imports took effect Tuesday, tariffs on Canadian and Mexican goods were put on hold for 30 days following discussions on border security and drug trafficking concerns. Trump is also scheduled to speak with Chinese President Xi Jinping in the coming days.

According to John Gong, a professor at the University of International Business and Economics in Beijing, China’s response remains measured to avoid further escalation of the trade dispute. He noted that China might be drawing inspiration from Canada and Mexico’s strategy in seeking a resolution.

The trade tensions are reminiscent of the 2018 U.S.-China trade war, during which both nations imposed a series of tariffs on each other’s goods. However, analysts suggest that China is now better positioned to respond, leveraging a diverse range of trade and economic tools to counter U.S. policies.

Top 10 U.S. Imports from China (2023)

The following are the most significant imports from China to the U.S. by value:

1. Cell Phones – $66.7B
2. Computers and Accessories – $53.1B
3. Electric and Industrial Equipment – $42B
4. Toys, Games, and Sporting Goods – $32.3B
5. Appliances and Furniture – $25.5B
6. Clothing and Textiles – $19.6B
7. Car Parts – $14.6B
8. Telecommunications Equipment – $12.9B
9. Cookware, Cutlery, Tools – $8.9B
10. Shoes – $7.9B

China Implements New Tariffs on U.S. Goods

In retaliation, China announced new tariffs on U.S. imports, which will take effect next Monday. These include:

• 15% tariff on coal and liquefied natural gas (LNG)
• 10% tariff on crude oil, agricultural machinery, and large-engine cars

The State Council Tariff Commission criticized the U.S. tariffs, stating they violate World Trade Organization (WTO) rules and harm economic cooperation between the two countries.

Despite the new restrictions, the impact on U.S. exports is expected to be limited. The U.S. is a leading LNG exporter, but its exports to China made up only 2.3% of total natural gas exports in 2023. Additionally, China primarily imports cars from Europe and Japan, with only 700,000 cars brought into the country last year.

China Imposes Export Controls on Critical Minerals

China is also tightening its grip on the supply of critical minerals essential for modern technology. The government announced new export controls on:

• Tungsten
• Tellurium
• Bismuth
• Molybdenum
• Indium

These minerals are vital for U.S. industries, including electronics and defense manufacturing. The restrictions add to the previous controls on gallium and germanium, implemented in December. Philip Luck, an economist at the Center for Strategic and International Studies, emphasized that the U.S. economy remains heavily dependent on China’s mineral exports, which could significantly impact supply chains.

China’s Crackdown on U.S. Companies

China’s State Administration for Market Regulation has launched an antitrust investigation into Google, citing possible violations of competition laws. Although no direct link was made to the tariffs, the announcement coincided with Trump’s 10% tariffs on Chinese goods.

Google’s presence in China is minimal, as its search engine is blocked and the company exited the Chinese market in 2010 after refusing to comply with government censorship policies. However, Chinese smartphone makers have previously raised concerns over Google’s Android business practices.

Additionally, China has placed PVH Group (owner of Calvin Klein and Tommy Hilfiger) and biotech firm Illumina on its Unreliable Entities List. This classification could:

• Prohibit their involvement in China-related import/export activities
• Restrict new investments in China

China’s scrutiny of PVH Group stems from the company’s boycott of Xinjiang cotton, which led to an investigation into its business practices last year.

Economic Consequences of a Prolonged Trade War

Experts believe that these measures signal a cautious yet strategic response from China. According to Stephen Dover, chief market strategist at the Franklin Templeton Institute, a prolonged U.S.-China trade war could result in:

• Slower global GDP growth
• Higher U.S. inflation
• Strengthening of the U.S. dollar
• Increased U.S. interest rates

With tensions rising, the global economy is bracing for further uncertainty as both nations navigate escalating trade conflicts.