China escalates trade war with new retaliatory tariffs on US exports

China will begin levying additional tariffs on $60 billion worth of US imports today.

Beijing is imposing up to 25% tariffs on almost 6,000 goods, including agricultural, chemical, electronic and industrial products. The implementation of today’s measures follow a US decision to apply 25% tariffs on $200 billion worth of Chinese imports as the world’s two largest economies struggle to reach a trade deal.

Because China has a substantial trade surplus with the US, a tit-for-tat tariff exchange gives the US the edge; Washington simply has more to tariff—and Beijing more to lose.

On the other hand, China’s leverage is its rare earth export, which it is threatening to restrict. China holds some 35% of the world’s rare earth reserves, and it produced 70% of global rare earths last year. Without this Chinese export, the automotive, clean energy and defence industries would struggle to meet demand.

Given the trade imbalance, Beijing’s tariffs are unlikely to spark any major concession from the US. However, expect China’s threat to restrict rare earth exports to strengthen its position at the negotiating table.

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