China Responds to U.S. Tariffs with Countermeasures and Investigation of Google

In a retaliatory move, China announced on Tuesday that it would impose tariffs on selected U.S. imports, reacting to President Donald Trump’s sweeping tariffs on Chinese products. Alongside these tariffs, China also initiated an investigation into Google regarding potential antitrust violations and unveiled other trade-related measures.

On the same day, U.S. tariffs affecting products from Canada and Mexico were scheduled to take effect. However, Trump granted a 30-day delay to allow the neighboring countries to satisfy his concerns related to border security and drug trafficking. In the upcoming days, Trump plans to engage in discussions with Chinese President Xi Jinping.

Experts view the Chinese response as "measured." John Gong, a professor at the University of International Business and Economics in Beijing, commented, "I don’t think they want the trade war escalating. They are likely hoping for a resolution similar to what occurred with Canada and Mexico."

This current cycle of trade tensions follows a previous trade war in 2018 when tariffs were raised by both nations. Analysts recognize that this time, China is more prepared, having announced diverse measures across various sectors, affecting both energy and individual U.S. companies.

Counter Tariffs Imposed

China is set to implement a 15% tariff on coal and liquefied natural gas (LNG) and a 10% tariff on crude oil, agricultural machinery, and larger engine automobiles imported from the U.S. These new tariffs are scheduled to go into effect next Monday.

In a statement, the State Council Tariff Commission criticized the U.S., stating, "The U.S.’s unilateral tariff increase seriously violates the rules of the World Trade Organization. It not only fails to address their own issues but also harms normal economic and trade cooperation between China and the U.S."

While the tariffs may seem significant, the impact on U.S. exports could be limited. Although the U.S. is a leading exporter of LNG globally, its exports to China are relatively small. Reports indicate that in 2023, the U.S. exported approximately 173,247 million cubic feet of LNG to China, making up only about 2.3% of its total natural gas exports. Additionally, the number of cars imported by China from the U.S. is minimal, as most imports come from Europe and Japan, according to Bill Russo, the founder of Automobility Limited.

Export Controls on Critical Minerals

China also announced new export controls on several crucial minerals used in modern technology. These minerals include tungsten, tellurium, bismuth, molybdenum, and indium—all classified as critical minerals by the U.S. Geological Survey, meaning they are vital for U.S. economic or national security and are susceptible to supply chain disruptions.

These controls are in addition to those China implemented last December on key elements such as gallium. Philip Luck, an economist at the Center for Strategic and International Studies, indicated that China's enhanced export control framework could significantly affect the U.S. economy, particularly given the country’s reliance on various critical minerals.

Overall, experts like Stephen Dover, chief market strategist at Franklin Templeton Institute, describe China’s response as calculated and restrained. However, concerns linger regarding potential repercussions across global economies. Dover warned that these developments could herald escalating trade tensions, resulting in lower GDP growth worldwide, increased inflation in the U.S., a stronger dollar, and upward pressure on U.S. interest rates.

Impact on U.S. Companies

In a notable development, China’s State Administration for Market Regulation revealed they are investigating Google due to suspicions of antitrust law violations. This announcement coincided closely with the timing of Trump’s 10% tariff implementation on Chinese goods.

The implications of this investigation on Google’s operations remain uncertain. The company has faced ongoing complaints from Chinese smartphone manufacturers regarding its business practices, especially concerning the Android operating system. Nonetheless, Google’s presence in China has been quite limited, as its search engine is blocked in the country, along with most other Western digital platforms. Google left the Chinese market in 2010 after declining to comply with governmental censorship, along with suffering a series of cyberattacks.

Additionally, Chinese authorities placed two U.S. companies on an unreliable entities list: PVH Group, known for its Calvin Klein and Tommy Hilfiger brands, and Illumina, a biotechnology firm with operations in China. Being on this list could restrict these companies from participating in trade activities related to China and hinder new investments in the country.

Beijing began investigating PVH Group in September of last year, concerning allegations related to the company's stance on Xinjiang cotton. The inclusion of these companies on the unreliable entities list raises alarm, indicating how the Chinese government may pressure U.S. businesses to respond to heightened tensions in U.S.-China relations.

According to George Chen, a managing director at The Asia Group, this situation is like a warning to American companies that their government's actions may have negative consequences for their businesses.

China, Tariffs, Google