China’s Counter Tariffs Against the US

On February 4, 2025, China announced new counter tariffs against the United States in response to recent tariff hikes imposed by the U.S. government. These tariffs include a 15% levy on coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, and large-displacement cars. The Chinese government labelled the U.S. actions as a violation of World Trade Organization (WTO) rules, asserting that they disrupt normal trade relations.

US-China Trade War

• The trade war between China and the United States escalated when President Donald Trump imposed additional tariffs on Chinese goods.
• This measure aimed to penalise China for failing to curb illegal drug and migrant flows into the U.S.
• The situation has rekindled tensions reminiscent of previous trade wars, with both nations seeking to assert their economic interests.

Antitrust Investigation of Google

Alongside the tariff announcement, China initiated an investigation into Google for potential antitrust violations. This move indicates a broader scrutiny of U.S. tech companies operating in China. Google’s services have been largely unavailable in China since 2010, yet the company continues to maintain a presence for advertising purposes.

Market Reactions

The initial market reactions were subdued. Analysts noted that China’s response was “measured and appropriate,” allowing Beijing to signal its discontent without escalating the conflict further. The U.S. dollar rebounded, while the offshore yuan weakened. Countries with strong trade ties to China, like Australia and New Zealand, experienced currency declines.

Strategic Implications

China’s response appears calculated to avoid economic disruption while still demonstrating its capacity to retaliate. By targeting specific sectors like energy and technology, China aims to inflict strategic damage on U.S. companies reliant on its market. The situation puts stress on the fragility of U.S.-China relations, which had shown signs of stabilisation after high-level talks in late 2023.

Global Economic Context

The ongoing trade conflict has broader implications for global trade dynamics. The U.S. and China are two of the world’s largest economies, and their actions can influence global markets. The tariffs and investigations may lead to increased tensions and uncertainty in international trade, affecting various sectors globally.

Month: Current Affairs - February, 2025

Category: Economy & Banking Current Affairs