China has issued a stern warning to the United States, condemning threats to escalate tariffs and pledging to retaliate if Washington follows through.
This uncompromising stance intensifies the ongoing trade war between the world’s two largest economies, dimming hopes for a swift resolution.
“The US threat to escalate tariffs on China is a mistake on top of a mistake, which once again exposes the extortionate nature of the US,” the Chinese Ministry of Commerce said in a strongly worded statement on Tuesday.
If the US insists on its own way, China will fight to the end.
The Chinese response came just hours after US President Donald Trump vowed to slap additional 50% import taxes on China unless it withdraws its retaliatory tariffs against his earlier levies.
This blunt reaction suggests China intends to resist Trump’s pressure, raising the prospect of a protracted and damaging conflict.
“The rhetoric from China is strong. Without Trump backing down investors may need to prepare for trade decoupling between both countries,” said Michelle Lam, greater China economist at Societe Generale SA, highlighting the potential for a significant shift in the global economic landscape.
Yuan weakens, stocks rebound: market volatility continues
China’s onshore yuan fell to its weakest level since 2023 after the Chinese central bank eased its control on the currency, while a gauge of Chinese stocks listed in Hong Kong rose as much as 3.7% after experiencing its worst day since the financial crisis on Monday, as the nation’s state-backed funds vowed to support the market.
This volatility underscores the uncertainty surrounding the trade dispute and its potential impact on the Chinese economy.
Doubling down: Trump’s cumulative tariff impact
Trump’s latest threat would come on top of the 34% “reciprocal” duty set to kick in on April 9, as well as a 20% levy implemented earlier this year, according to a White House official.
This would bring the cumulative tariff announced this year to a staggering 104%, effectively doubling the import price of any good shipped from China to the US, a move that would likely have significant repercussions for both economies.
The Chinese Ministry of Commerce also called for dialogue to resolve disputes in its statement, although Trump on Monday said “all talks with China” about a meeting will be terminated if Beijing doesn’t take action, without specifying what would be required.
The escalation of tensions is dimming the prospect of any imminent leadership call.
Trump hasn’t spoken with Chinese President Xi Jinping since returning to the White House, marking the longest period without communication between a US president and his Chinese counterpart post-inauguration in 20 years, highlighting the strained relationship between the two countries.
Earlier in the week, the Communist Party’s official newspaper published an editorial declaring Beijing is no longer “clinging to illusions” of striking a deal.
Xi has vowed to boost domestic consumption, recognizing that the tariffs are expected to hurt exports, a sector responsible for a third of China’s economic growth last year.
According to Bloomberg, Ding Shuang, chief economist for Greater China & North Asia at Standard Chartered, predicts that China will respond to any new US tariffs with equivalent measures, arguing that any fresh levies from the US will have a limited impact on the Asian nation.
“The marginal effect of raising tariffs further from the existing level of about 65% will shrink,” he said of additional US tariffs.
Most Chinese exports to the US have already been affected. For goods that are not price sensitive, tariffs won’t work no matter how high they go.
US ‘hegemony’: China defends its interests
In response to the latest US move, China’s embassy in Washington asserted that US threats and pressure are “not the right way to engage” with China and that the nation will defend its interests.
“The US hegemonic move in the name of ‘reciprocity’ serves its selfish interests at the expense of other countries’ legitimate interests and puts ‘America first’ over international rules,” embassy spokesman Liu Pengyu said, signaling China’s determination to protect its economic sovereignty.
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