Trade War Monitor, April 9: China Retaliates Against the U.S., Unites With the EU

The trade dispute between the United States and China escalated further as China imposed a significant 50% increase on its retaliatory tariffs on all U.S. goods, raising the total tariff to 84%. Additionally, China placed twelve American firms on its export control list, barring them from exporting dual-use items, and added six companies to its unreliable entity list, which restricts them from engaging in import/export activities or making new investments within China[para. 2][para. 3]. In a move to counteract U.S. tariffs, China is also building alliances, with Premier Li Qiang contacting European Commission President Ursula von der Leyen to coordinate efforts to uphold free trade[para. 4].

Following these developments, EU member states endorsed a 25% retaliatory tariff against the U.S., set to be collected starting April 15, acting in response to tariffs imposed by the U.S. on steel and aluminum imports[para. 5]. With Europe joining the fray, the situation has evolved into a global trade war. This conflict arrives against the backdrop of the offshore yuan falling to its weakest level against the U.S. dollar in over a decade, driven by the imposed tariffs that have disrupted China's supply chains and unsettled the currency market[para. 6][para. 7].

Despite the turmoil, China's stock exchange-traded funds saw a notable influx of 175.5 billion yuan, equivalent to $24 billion, over two days, reflecting support by state-backed entities to stabilize the market amidst U.S.-imposed tariffs[para. 8][para. 9]. The renewed coordination between China and the EU reflects their intention to safeguard free trade, with China condemning U.S. actions as unilateralism and economic bullying. The EU has countered with its tariffs, responding to the punitive tariffs the U.S. put on steel and aluminum imports from the EU[para. 10][para. 11].

China released a white paper accusing the U.S. of suppression tactics through tariffs and emphasized its countermeasures to defend its national interests. However, it left open possibilities for resolution through dialogue[para. 12]. In the automobile sector, China's exports, particularly electric vehicles, face pressure from tariffs, which have significantly increased to 145% for EVs and 70% for gasoline vehicles, affecting billions in exports[para. 13][para. 14].

Conversely, China's semiconductor sector might benefit as the trade tensions could boost domestic production, replacing U.S. alternatives—particularly in equipment and components—potentially alleviating existing market bottlenecks[para. 15][para. 16]. Despite the trade disputes, Hong Kong maintains its position as a free port, with policies supporting the free movement of goods and capital, along with aid for local businesses in navigating trade challenges[para. 17][para. 18].