China strikes back against unprecedented US tariffs

Holy smokes, things are getting heated.

On Friday, Beijing announced a string of countermeasures to punish the US for its unprecedented tariff hikes on imports from China.

ICYMI: On Wednesday, US President Donald Trump unveiled his “Liberation Day” tariffs to rebalance US trade with the rest of the world.

• TL;DR: China faces a 34% tariff increase – in addition to previous tariffs – on its exports to the US, starting next week.

Beijing is hitting back by:

• Applying a blanket 34% tariff on all US goods imports, effective April 10
• Banning sorghum from agricultural exporter C&D (USA) Inc., along with import restrictions targeting two US poultry exporters and a bonemeal exporter, effective immediately
• Adding a string of rare-earth minerals to its export control lists, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium
• Adding 16 US companies to its Control List for dual-use exports, and 11 US firms to the Unreliable Entities List – companies on these lists face restrictions on doing business in China or buying Chinese dual-use goods
• Launching an antimonoploy investigation into US biotech giant DuPont
• Launching an anti-dumping probe into imports of certain medical CT tubes from the US (and India)

Symbolically, Beijing has also appealed against the US tariffs at the World Trade Organization.

Get smart: Beijing’s response – although aggressive – was predictable. We highlighted yesterday how China would use a mix of tariffs and regulatory restrictions to retaliate against the US.

• These moves are right out of the playbook Beijing employed in the two earlier rounds of tariffs this year.
• Notably, though, Beijing has left itself plenty of room to ramp up its retaliation – such as raising tariffs further to fully match US levies, or by expanding agricultural import restrictions to further harm Trump's domestic support base.
• Also worth pointing out: Beijing has also left plenty of room for de-escalation, if the two countries can ever find their way to the negotiating table.

Get smarter: Trump is predictably unpredictable, making it impossible to forecast how he will respond to China’s retaliation.

What to watch: At this point, neither Trump nor Xi Jinping appear to be in any rush to start negotiating.

• As we said, in our weekly wrap on Saturday: settle in folks, this trade war is going to be a long one.