Trade War Monitor, July 7: Trump Threatens More Tariffs, China Retaliates Against EU

U.S. President Donald Trump announced on Truth Social his intent to impose an additional 10% tariff on any country that aligns with the "Anti-American policies" of the BRICS nations, a group consisting of 10 emerging countries including Brazil, Russia, India, China, and South Africa, following their recent summit in Brazil. Trump did not specify which BRICS policies he considers to be anti-American. This statement signals escalating trade tensions between the U.S. and alliances like BRICS[para. 1][para. 2].

In a further escalation of global trade tensions, China retaliated on Sunday against the European Union’s ban on Chinese companies from participating in the EU’s procurement market for medical devices. China’s response included immediately excluding medical devices imported from the EU worth more than 45 million yuan ($6.3 million) from government purchases. The European Chamber of Commerce in China criticized this move as an escalation, expressing concern that local enforcement could be overly strict, affecting even European medical device manufacturers with a strong presence in China[para. 3][para. 4]. The newsletter notes its intention to keep monitoring the developing "economic warfare" so readers can stay informed about impacts[para. 5].

On a different front, the U.S. has lifted export controls on semiconductor design software to China, reflecting progress in implementing a bilateral trade agreement. Siemens AG received notice from the U.S. Commerce Department’s Bureau of Industry and Security (BIS) that restrictions on electronic design automation (EDA) software exports to China no longer apply, and Siemens has resumed full access and support for its software in China. Likewise, U.S.-based Synopsys Inc. and Cadence Design Systems are working to restore Chinese access to their previously restricted products[para. 7][para. 8][para. 9].

The U.S. and Vietnam have reached a trade agreement where Vietnam committed to fully open its market to American products in exchange for a 20% tariff on all Vietnamese exports to the U.S., and a 40% tariff on U.S.-bound goods transiting through Vietnam. Vietnamese leader To Lam welcomed the deal but didn't confirm all details. U.S. negotiators aimed to reduce Chinese technological content in U.S.-bound devices assembled in Vietnam, reflecting efforts to limit China’s tech footprint in regional manufacturing. China's foreign ministry responded that negotiations should not harm the interests of third parties, and called for resolving economic and trade differences through dialogue[para. 10][para. 11][para. 12].

Amidst these trade tensions, China reiterated its ban against EU medical devices exceeding 45 million yuan for government purchase, but allowed exemptions for products made by European companies in China, effective immediately, citing retaliation for the EU's earlier ban on Chinese firm participation in EU markets[para. 14]. China also imposed anti-dumping duties of up to 34.9% on EU brandy imports, effective July 5, after finding they were sold below fair value and harmed the domestic industry. Three major EU producers—Martell, Hennessy, and Rémy Martin—will face duties from 27.7% to 34.9% over the next five years, with other EU producers facing up to 34.9% as well[para. 16][para. 17][para. 18][para. 19].

Finally, growth in China's services sector slowed in June, with the Caixin China General Services Business Activity Index dropping to 50.6 (down 0.5 from May), driven by the sharpest decline in foreign demand since December 2022. The sector represents about 61% of China's GDP. The official services PMI also dipped, landing at 50.1 from the previous month, highlighting softness in the sector's expansion[para. 21][para. 22][para. 24][para. 25].