Beijing hits US agriculture, says won't be bullied

05/03/2025 06:04 AST

China on Tuesday swiftly retaliated against fresh US tariffs, announcing hikes to import levies covering $21 billion worth of American agricultural and food products, moving the world's top two economies a step closer towards an all-out trade war.

Beijing also placed twenty five US firms under export and investment restrictions on national security grounds, but refrained from punishing any household names, as it did when it retaliated against the Trump administration's February 4 tariffs. In a press conference, China's foreign ministry said the country has never succumbed to bullying or coercion, and that "trying to exert extreme pressure on China is a miscalculation and a mistake."

China's latest retaliatory measures came as the extra 10 percent duty U.S. President Donald Trump threatened the world's second-largest economy with last week entered into force at 0501 GMT on March 4, resulting in a cumulative 20 percent tariff in response to what the White House considers Chinese inaction over drug flows.

China has accused the White House of "blackmail" over its tariff hike, saying it has some of the world's toughest anti-drug policies. Analysts say Beijing still hopes to negotiate a truce with the Trump administration, deliberately setting its tariff hikes below 20 percent to leave Chinese negotiators room to hash out a deal, but each escalation reduces the chance of a rapprochement.

"China's government is signaling that they do not want to escalate," said Even Pay, agriculture analyst at Trivium China. "It's fair to say we're in the early days of Trade War 2.0," Pay added, noting that there is still time to avoid a protracted trade war if Trump and Chinese President Xi Jinping are able to strike a deal. The new US tariffs represent an additional hike to preexisting levies on thousands of Chinese goods.

Some of these products bore the brunt of sharply higher US tariffs under former president Joe Biden last year, including a doubling of duties on Chinese semiconductors to 50 percent and a quadrupling of tariffs on Chinese electric vehicles to over 100 percent. The 20 percent tariff will apply to several major US consumer electronics imports from China that were previously untouched, including smartphones, laptops, videogame consoles, smartwatches and speakers and Bluetooth devices. China responded immediately after the deadline, announcing it will impose an additional 15 percent tariff on US chicken, wheat, corn and cotton and an extra 10 percent levy on US soybeans, sorghum, pork, beef, aquatic products, fruits and vegetables and dairy imports from March 10.

The additional levies will hit about 15 percent of US exports to China or $21 billion worth of trade, according to Reuters calculations based on US census data for 2024. Beijing also added 15 US companies to its Export Control List, which prohibits Chinese firms supplying American companies with dual-use technologies, and 10 American companies to its Unreliable Entity List for selling arms to Taiwan, which China claims as its own territory. "We're still on track to 60 percent (tariffs)," said Cameron Johnson, supply chain expert at Tidalwave Solutions, referring to Trump's campaign trail threat. - Reuters

"At the moment, with 20 percent, it just barely moves the needle for companies wanting to move potential supply chains out of the country," he added. "At 35 percent, we start to see that companies will start to move or consider other strategies."

China is the biggest market for US agricultural products, and the sector has long been vulnerable to being used as a punching bag in times of trade tensions. Chinese imports of USagriculture goods fell for a second year to $29.25 billion in 2024 compared to 42.8 billion in 2022. China's futures markets were steady after the announcement. The world's biggest agricultural importer's most actively traded soymeal DSMcv1 and rapeseed meal futures saw a 2.5 percent increase on Monday after the Global Times reported Beijing planned to hit US agricultural exports.

Trade tensions risk exacerbating US inflation and China's continuing efforts to mount a durable post-COVID economic recovery, which has been heavily reliant on exports.

The US-China Business Council (USCBC) on Tuesday applauded Trump's goal of addressing the illegal trade of fentanyl, but said raising tariffs on Chinese products "is not the way to achieve that goal."

"Across-the-board tariffs will hurt US businesses, consumers, and farmers and undermine our global competitiveness," USCBC President Sean Stein said in a statement.

Reuters