In response to the United States imposing a 10 percent tariff on all Chinese imports, China has countered with a 15 percent tariff on selected US goods, according to ABC News. This move marks the intensification of a trade war between the world’s two largest economies.
The Australian dollar and local share markets took a hit following the announcement, though global markets have shown a more muted reaction so far.
China’s Ministry of Commerce declared the implementation of counter-tariffs on a range of US products. These include a 15 percent tariff on coal and liquefied natural gas and a 10 percent tariff on crude oil, agricultural machinery, and large-displacement cars. The announcement coincides with the US’s blanket 10 percent tariff on Chinese imports, which came into effect on Tuesday.
AMP chief economist Shane Oliver noted, “Just as Canada and Mexico announced retaliation to US tariffs, China is following suit. No big surprises here.” However, he suggested a slight possibility of a delay in Chinese tariffs if negotiations between US President Donald Trump and Chinese President Xi Jinping yield an agreement, though this is seen as less likely compared to deals with Canada and Mexico.
The White House confirmed that Mr. Trump plans to speak with President Xi in the coming days. However, China’s firm response signals its stance against what it perceives as unhelpful and unnecessary tariffs.
“The US’s unilateral tariff increase seriously violates the rules of the World Trade Organization,” China’s Ministry of Commerce stated. “It does not help resolve its own issues and instead harms normal economic and trade cooperation between China and the US.”
Dr. Oliver warned that the trade dispute has a long way to go, predicting continued volatility in the Australian dollar and share markets.
“The Australian dollar initially found relief as Trump backed down on tariffs against Canada and Mexico,” he explained. “However, with China swiftly imposing counter-tariffs and launching an investigation into Google for alleged anti-trust violations, further economic turbulence is expected.”
Market analysts view China’s move as a significant escalation. Share market commentator Henry Jennings described the situation as reaching “DEFCON 3,” a military term indicating heightened readiness. In economic terms, this suggests rising financial market tensions and potentially tighter monetary conditions that could drive interest rates higher.
“China’s retaliation with tariffs and an investigation is more symbolic than substantial at this stage,” Jennings said. “But the broader implications for global markets and trade relations remain uncertain.”