China counters with tariffs on US products and it will also investigate Google

China countered President Donald Trump’s across-the-board tariffs on Chinese products with tariffs on select U.S. imports yesterday, as well as announcing an antitrust investigation into Google and other trade measures.

U.S. tariffs on products from Canada and Mexico were also set to go into effect Tuesday before Trump agreed to a 30-day pause as the two countries acted to appease his concerns about border security and drug trafficking. Trump planned to talk with Chinese President Xi Jinping in the next few days.

The Chinese response was “measured,” said John Gong, a professor at the University of International Business and Economics in Beijing. “I don’t think they want the trade war escalating,” he said. “And they see this example from Canada and Mexico and probably they are hoping for the same thing.”

This isn’t the first round of tit-for-tat actions between the two countries. China and the U.S. had engaged in a trade war in 2018 when Trump raised tariffs on Chinese goods and China responded in kind.

This time, analysts said, China is much better prepared to counter, with the government announcing a slew of measures that cut across different sectors of the economy, from energy to individual U.S. companies.

Counter tariffs

China said it would implement a 15% tariff on coal and liquefied natural gas products as well as a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the U.S. The tariffs would take effect next Monday.

“The U.S.’s unilateral tariff increase seriously violates the rules of the World Trade Organization,” the State Council Tariff Commission said in a statement. “It is not only unhelpful in solving its own problems, but also damages normal economic and trade cooperation between China and the U.S.”

The impact on U.S. exports may be limited. Though the U.S. is the biggest exporter of liquid natural gas globally, it does not export much to China. In 2023, the U.S. exported 173,247 million cubic feet of LNG to China, representing about 2.3% of total natural gas exports, according to the U.S. Energy Information Administration.

China imported only about 700,000 cars overall last year, and the leading importers are from Europe and Japan, said Bill Russo, the founder of the Automobility Limited consultancy in Shanghai.

Further export controls on critical minerals

China announced export controls on several elements critical to the production of modern high-tech products.

They include tungsten, tellurium, bismuth, molybdenum and indium, many of which are designated as critical minerals by the U.S. Geological Survey, meaning they are essential to U.S. economic or national security that have supply chains vulnerable to disruption.

The export controls are in addition to ones China placed in December on key elements such as gallium.

“They have a much more developed export control regime,” Philip Luck, an economist at the Center for Strategic and International Studies and former State Department official, said at a panel discussion yesterday [Macau time].

“We depend on them for a lot of critical minerals: gallium, germanium, graphite, a host of others,” he said. “So … they could put some significant harm on our economy.”

US companies also impacted

In addition, China’s State Administration for Market Regulation said yesterday it is investigating Google on suspicion of violating antitrust laws. The announcement did not mention the tariffs but came just minutes after Trump’s 10% tariffs on China were to take effect.

It is unclear how the probe will affect Google’s operations. The company has long faced complaints from Chinese smartphone makers over its business practices surrounding the Android operating system, Gong said.

Otherwise, Google has a limited presence in China, and its search engine is blocked in the country like most other Western platforms. Google exited the Chinese market in 2010 after refusing to comply with censorship requests from the Chinese government and following a series of cyberattacks on the company.

Google did not immediately comment.

The Commerce Ministry also placed two American companies on an unreliable entities list: PVH Group, which owns Calvin Klein and Tommy Hilfiger, and Illumina, which is a biotechnology company with offices in China. The listing could bar them from engaging in China-related import or export activities and from making new investments in the country.

Beijing began investigating PVH Group in September last year over “improper Xinjiang-related behavior” after the company allegedly boycotted the use of Xinjiang cotton.

The response from China appears calculated and measured, said Stephen Dover, chief market strategist and head of the Franklin Templeton Institute. However, the world is braced for further impact.

“A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower GDP growth everywhere, higher U.S. inflation, a stronger dollar and upside pressure on U.S. interest rates,” Dover said. KEN MORITSUGU & HUIZHONG, BEIJING, MDT/AP