China vows to retaliate as necessary after Trump threatens another 10% tariff hike

Chinese President Xi Jinping and US President

Donald Trump  

CNBC: China’s Ministry of Commerce said Friday that it “firmly opposes” US President Donald Trump’s latest threat to ramp up tariffs on Chinese goods and vowed retaliation, if necessary.

“If the US insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,” a Ministry of Commerce spokesperson said in a statement, translated by CNBC.

“We urge the US side to not repeat its own mistakes, and to return as soon as possible to the right track of properly resolving conflicts through dialogue on equal footing.”

The statement followed Trump’s Thursday announcement that the US would impose an additional 10% duty on Chinese imports on March 4, which coincides with the start of China’s annual parliamentary meetings.

The new tariffs would be on top of the 10% further tariffs that Trump levied on China on Feb. 4.

Trump announced the two rounds of China duties were being impose in response to the Asian country’s role in fentanyl trade. The addictive drug, precursors to which are mostly produced in China and Mexico, has led to tens of thousands of overdose deaths each year in the US.

“In the short term, China’s response will likely include raising tariffs on select US imports, adding more American firms to its unreliable entity list, and potentially further tightening export controls on critical minerals,” Neil Thomas, a fellow on Chinese politics at Asia Society, said by email.

He noted he nevertheless expects Beijing’s retaliation will remain “measured,” as Chinese President Xi Jinping has an incentive to meet with his American counterpart and initiate negotiations to avoid measures that put greater pressure on already sluggish economic growth.

China’s exports have been a rare bright spot in an otherwise slowing economy. The US is China’s largest trading partner on a single-country basis.

While Beijing may maintain a “restrained” stance, upcoming moves will likely target industries that matter the most to Trump supporters, said Alfredo Montufar-Helu, head of China center at The Conference Board.

China would prefer to leave some room for further negotiations as it hopes to avoid even higher import tariffs and other “corrective” measures by Washington, he said.

After the first round of tariffs earlier this month, China’s retaliatory measures included raising duties on certain US energy imports and putting two US companies on an unreliable entities list that could restrict their ability to do business in the Asian country.

China has also increased controls on exports of critical minerals that the US needs.

“The sharpest arrow that China has in its quiver would be to restrict US access to critical minerals that can’t readily be sourced elsewhere,” said Stephen Olson, a visiting senior fellow at Institute of Southeast Asian Studies and a former US trade negotiator.

Despite the lack of specifics, the Ministry of Commerce statement on Friday struck a stronger tone than the country’s response to the initial 10% duties earlier this month.

The ministry defended China’s drug control efforts and called the latest tariff threat — on grounds of illegal fentanyl flows — as “purely shifting the blame” without helping the US solve its own drug problems. It also denounced the additional levies for “adding to the burdens on American businesses and consumers and disrupting the global supply chain.”

The latest communique “sends a clear message that the Chinese government is ready to respond in defence of national interests, and they won’t ‘bend the knee,’” said Montufar-Helu.

In contrast, the ministry’s statement dated Feb. 2 urged Washington to manage fentanyl issues “objectively and rationally” while cautioning the tariffs could damage normal China-US economic and trade relations.

China’s Ministry of Foreign Affairs also toughened its tone in a response to the tariffs Friday. The US act of “pressuring, coercing and threatening” China with tariffs will only backfire, spokesperson Lin Jian said in Chinese comments reported by state media and translated by CNBC.