Trade War Monitor, April 11: China Retaliates Again, Refuses Further Tit-for-Tat Tariff Hikes

China announced an increase in retaliatory tariffs on U.S. goods from 84% to 125%, responding to heightened U.S. tariffs under President Donald Trump. This escalation brings total U.S. tariffs on Chinese goods to 145%, a number including levies tied to accusations of China’s role in fentanyl trafficking. Notably, China’s Finance Ministry stated it would “ignore” further U.S. tariff hikes, believing that American goods would not find market acceptance at the current rates. This marks a critical moment in the ongoing trade tensions between the two economies [para. 1][para. 3].

Chinese President Xi Jinping, aiming to strengthen alliances, welcomed Spain’s Prime Minister Pedro Sánchez, the first European leader to visit China since the U.S. tariffs escalated. Sánchez expressed support for multilateral trade, contrasting the U.S.' unilateral measures — a stance that drew sharp criticism from U.S. Treasury Secretary Scott Bessent, who warned against aligning with China [para. 3][para. 9]. Additionally, China is reportedly engaging other trading partners, like Saudi Arabia and South Africa, to collectively counter U.S. trade measures [para. 7].

Canada, under new leadership by Prime Minister Mark Carney, announced its own firm stance against U.S. trade policies. Carney pledged to retaliate with targeted countermeasures, stating Canada would not tolerate unfair targeting of its industries or workers [para. 4]. Meanwhile, Southeast Asia remains a key focus for President Xi, who plans visits to Vietnam, Malaysia, and Cambodia to bolster ties with some of China’s top trading partners [para. 7].

The trade conflict is already affecting global markets and industries. For instance, the U.S. revoked the “de minimis” tax exemption, imposing a 120% tariff or flat $100 fee on small packages from China, a move that impacts major e-commerce platforms like Shein and Temu. These companies had relied on the exemption for competitive pricing, and shipments utilizing it surged from 139 million annually in 2015 to over 1 billion by 2023. This new rule could disrupt the businesses of these firms [para. 10].

In financial markets, the offshore yuan rebounded slightly after a decline caused by recent tariff developments. The yuan’s recovery coincided with a drop in the U.S. Dollar Index, which hit its lowest level since July 2023 [para. 12]. Conversely, heightened fears of a U.S. economic downturn led gold prices to surge, crossing $3,200 an ounce in London and 750 yuan a gram in Shanghai as investors seek safe-haven assets amid uncertainty [para. 13].

Domestically, China is acting to stabilize markets. Major state-owned banks are facilitating loan programs to support companies involved in share buybacks. These actions, backed by a central bank relending facility, aim to restore liquidity and investor confidence in China’s financial sector [para. 14]. However, the U.S. tariff hikes are challenging China’s exporters, leading to cash flow constraints, potential loan defaults, and fluctuations in the yuan. This could curtail foreign investments by Chinese companies while increasing risks for overseas expansion [para. 17].

Logistical challenges are also evident as Shanghai’s busy port experienced a significant halt following the tariff hikes. Previously bustling with shipments racing to meet deadlines, the docks are now stacked with idle containers, reflecting the immediate disruption caused to trade flows [para. 15].

The trade war’s ripple effects extend beyond tariffs, impacting financial, trade, and geopolitical stability across regions. Both sides are expected to adjust monetary policies, including potential interest rate cuts, to mitigate economic fallout. China’s financial strategies and overseas plans face reassessment as these challenges continue unfolding [para. 17].