U.S. President Donald Trump stated on Tuesday that he is not rushing to engage in discussions with Chinese President Xi Jinping regarding the escalating trade tensions between the two largest economies, which have been triggered by his broad 10% tariffs on all imports from China.
In response, China implemented targeted tariffs on U.S. goods and issued warnings to several companies, including Google, regarding potential sanctions, reflecting a measured reaction to Trump’s tariffs.
When questioned about China’s retaliatory measures, Trump responded, “That’s fine,” during a press briefing at the White House. A dialogue between Xi and Trump is considered crucial for potentially easing or postponing the tariffs, similar to the discussions held with leaders from Mexico and Canada the previous day.
White House spokesperson Karoline Leavitt informed reporters that a call between Trump and Xi is yet to be arranged. “President Xi did reach out to President Trump to discuss this matter, possibly to initiate negotiations. We will see how that conversation unfolds,” Leavitt mentioned to Fox Business Network earlier on Tuesday.
China’s restrained response to Trump’s 10% tariff on all imports indicates an effort by Chinese officials to engage in dialogue with Trump to prevent a full-blown trade war between the two nations. Liu Pengyu, a spokesperson for the Chinese embassy in Washington, expressed that China hopes the U.S. will collaborate with Beijing to maintain stable, healthy, and sustainable relations between the two countries.
The International Monetary Fund recently cautioned that an increase in protectionist measures could negatively impact investment and disrupt supply chains. It emphasized the importance of finding constructive solutions to disagreements in order to facilitate trade for the benefit of all parties involved.
Capital Economics, a research firm based in the UK, projected that China’s new tariffs would affect approximately $20 billion in annual imports, in contrast to the $450 billion worth of Chinese goods that are subject to the Trump administration’s tariffs, which took effect at 12:01 a.m. ET on Tuesday (0501 GMT).
Julian Evans-Pritchard, the head of China Economics at the firm, noted in a report that “the measures are relatively modest compared to U.S. actions and are designed to convey a message to the United States.”
On Monday, Trump announced a suspension of his proposed 25% tariffs on Mexico and Canada, agreeing to a 30-day delay in exchange for concessions related to border security and crime enforcement.
EUROPE NEXT?
As for Europe, Trump hinted on Sunday that the European Union might be his next target for tariffs, although he did not specify a timeline. Ursula von der Leyen, president of the European Commission, stated that Brussels is prepared for rigorous negotiations but emphasized the necessity of establishing a stronger partnership with the EU’s largest trade and investment partner. “We will approach this with openness and pragmatism, but we will also make it clear that we will always safeguard our own interests, whenever and however necessary,” she remarked in her address.
The European Commission and the new U.S. administration have engaged in technical discussions; however, there has yet to be a direct conversation between von der Leyen and Trump, according to a spokesperson for the Commission.
In response to the implementation of Trump’s tariffs, China has introduced new measures that include a 15% tariff on U.S. coal and LNG, as well as a 10% tariff on crude oil, agricultural machinery, a limited number of trucks, and large-engine sedans imported from the U.S. to China.
Additionally, China has announced an anti-monopoly investigation into Google, a subsidiary of Alphabet. The country has also placed PVH Corp, which owns brands like Calvin Klein, and U.S. biotech firm Illumina on a list for potential sanctions. PVH expressed its surprise and “deep disappointment” regarding China’s decision, emphasizing its commitment to adhering to all applicable laws and regulations.
An Illumina representative stated via email that the company has a long-standing presence in China and ensures compliance with all relevant laws wherever it operates. Google chose not to comment on the ongoing investigation.
EXPORT CONTROLS ON SELECT METALS
China has declared it will implement export controls on certain metals, including tungsten, which are essential for electronics, military applications, and solar panel production. The 10% tariff on electric trucks imported from the U.S. may impact Tesla’s Cybertruck, a specialized model that the company has been marketing in China. Tesla has not provided an immediate response.
These new tariffs from China will not be enforced until Monday, allowing time for Washington and Beijing to negotiate a potential agreement, which Chinese officials have expressed a desire to achieve with Trump amid weakening domestic demand. During his first term, Trump initiated a two-year trade conflict with China over its trade surplus with the U.S., leading to reciprocal tariffs that disrupted global supply chains and adversely affected the world economy.
Oxford Economics indicated in a recent report that the trade war is still in its initial phases, suggesting a high probability of additional tariffs. President Trump has mentioned the possibility of further increasing tariffs on China unless the country takes action to halt the flow of fentanyl, a potent opioid, into the U.S.
China has responded by labeling fentanyl as an American issue and has announced plans to contest the tariffs at the World Trade Organization, while also considering other countermeasures, though it remains open to negotiations.
In terms of crude oil, the United States represents a minor supplier to China, contributing only 1.7% of its imports last year, valued at approximately $6 billion. Additionally, just over 5% of China’s liquefied natural gas imports originated from the U.S.
Gary Ng, a senior economist at Natixis in Hong Kong, noted that even if the U.S. and China can reach agreements on certain matters, tariffs may still be employed as a recurring strategy, potentially leading to significant market fluctuations throughout the year.
There was a sense of relief in both Ottawa and Mexico City after Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced their agreement to enhance border enforcement, resulting in a 30-day pause on the 25% U.S. tariffs set to take effect on Tuesday.
EU trade chief Maros Sefcovic expressed a desire for early discussions with the United States to prevent the imposition of potential tariffs, stating, “We believe through constructive engagement and discussion we can resolve this problem.”
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