China has declared war on US President Donald Trump’s traditional support base by raising tariffs on all imported US goods to 84%. The retaliatory strike is up from the 34% previously announced and sets in motion a devastating tit-for-tat trade dispute between the economic superpowers.
Trump had earlier already hit Beijing with an astounding 125% levy. Tariff rates are so high between the two countries now experts said it amounts to an effective embargo for all but essential goods. China has deliberately hit US agriculture in an attempt to neuter Trump’s fanatical support.
The Economist’s geopolitics editor David Rennie said: “China likes to plan. It likes five-year plans. It finds it very hard to deal with this mercurial transactional American president.
“They’ve been preparing really carefully for a long time. They’ve been doing short-term America-specific defensive kind of preparations and some longer-term attempts to reshape and rebalance their entire economy away from this incredibly high dependence on exports.
“The thinking in Beijing goes, ‘What can we target that is gonna hurt Trump voters and get Trump’s attention, and we can buy that from somewhere else?’”
Chinese tariffs on soybeans from the US specifically target Trump’s support base in the US midwest but Beijing thinks it can source them from Brazil and Argentina instead.
China sold £342.5bn of goods to America last year – roughly three times what US firms sold to China.
However, the 84% Chinese levies will have a huge impact on US agricultural companies, which count China as their largest export market.
The trade war between the world’s two biggest economies shows no signs of slowing down. Beijing has vowed to “fight to the end”, but a defiant White House said that it will not back down.
Apart from tariffs, China has also slapped restrictions on more than a dozen US firms which prohibit their executives from entering China or ban them from investing in the country.
Asian markets have reacted positively after Trump paused his so-called “reciprocal” tariffs on most of America’s trading partners for 90 days, despite the US president increasing those on China to 125%.
After his “Liberation Day” tariffs on April 2, there were widespread fears of an economic meltdown and global recession as stock markets plunged.
However, Japan’s Nikkei share average was up 8.2% earlier today, while the broader Topix had risen 7.5%.
The S&P 500 stock index jumped 9.5% and global markets bounced back following Trump’s climbdown and announcement that increased tariffs on nearly all US trading partners would be paused.
Goldman Sachs had forecast a 65% chance that the US economy would shrink this year but has since revised that assessment to 45%. Fellow US investment bank JP Morgan said there was a 60% chance of recession.
