China Strikes Retaliatory Measures Against US Following Trump's 10% Tariffs: It's 'Much-Less Than Proportional,' Analyst Says

China responds to the across-the-board 10% tariffs imposed by Donald Trump‘s administration with targeted measures on a range of U.S. energy imports and restrictions on key minerals exports, officially reopening a new chapter in the trade war between the world’s two largest economies.

“The unilateral increase in tariffs by the United States seriously violates the rules of the World Trade Organization,” the Ministry of Finance of the People’s Republic of China stated Tuesday.

What Happened

As the U.S. implemented a 10% tariff on all Chinese imports, China responded on Feb. 4 with a series of countermeasures.

These included:

Raising tariffs by 10-15% on certain U.S. imports such as coal, liquified natural gas, crude oil, agricultural machinery and vehicles.
Imposing export restrictions on key minerals like tungsten, tellurium, bismuth, molybdenum, and indium, along with their related metallic compounds.
Adding two U.S. companies, PVH Corp. PVH and Illumina Inc. ILMN, to its Unreliable Entity List in order to “safeguard national sovereignty, security and development interests.” According to China, these companies “violated the principles of normal market transactions, interrupted normal transactions with Chinese enterprises, and took discriminatory measures against Chinese enterprises.”
Initiating an antitrust investigation into Alphabet Inc. GOOGL.

According to an official statement, China’s retaliatory tariffs on U.S. goods will take effect on Feb. 10, while the export ban on critical minerals has already been enforced.

The Executive Order signed by Trump on Feb. 1 stated that if China were to retaliate by imposing additional tariffs on US goods, the 10% tariff rate might be raised further.

Why It Matters

Goldman Sachs economist Andrew Tilton indicates that China’s newly announced retaliatory tariffs cover a much narrower range of goods compared to the broad 10% U.S. tariff on Chinese imports.

The combination of tariffs, export restrictions, entity list designations and antitrust investigations suggests a more strategic and coordinated policy response than during the 2018-19 trade war, according to the expert.

Goldman Sachs’ estimates indicate that the U.S. accounts for a relatively small share of China’s imports in the targeted energy sectors. In 2024, China imported $4.5 billion worth of coal and LNG from the U.S., representing just 5% of its total imports for these products. For crude oil, U.S. exports to China totaled $9.4 billion, making up only 3% of China’s total crude imports.

Based on the investment bank’s calculations, the impact of China’s counter tariffs is “much-less than proportional,” as China is effectively imposing an additional 12% tariff on $14 billion in U.S. goods, compared to the U.S. implementing a 10% tariff on $525 billion worth of Chinese products.

Yet, “the future path of US-China trade conflicts remains highly uncertain, and reactions from the US to China's retaliation, the potential Trump-Xi phone call, and PBOC’s daily USDCNY fixing in the coming days are key events to watch,” Tilton says.

Market Reactions

The Chinese yuan gained marginal ground against the U.S. dollar on Tuesday, up 0.2% by 8:15 a.m. in New York.

China’s trade measures weighed on energy commodities, with futures on WTI and natural gas down 1.7% and 4%, respectively. Gold prices rose 0.3% to $2,830 per ounce, setting new all-time highs.

Futures on major U.S. indices were mixed during Tuesday premarket trading, with contracts on the S&P 500 up 0.3% while those on the Dow edging 0.1% lower.

US-listed Chinese stocks rallied in the premarket. Shares of Alibaba Group Holding Ltd. BABA rose 2%, PDD Holdings Inc. PDD surged 2.1% and JD.com Inc. JD rallied 2.6%.

The iShares China Large-Cap ETF FXI was 1.8% higher.

Read now: