China ramps up global trade war
Trillions of dollars have been wiped from global markets today as the world´s two largest economies find themselves, unequivocally, in a trade war.
China has launched a fresh retaliation to Trump´s sweeping tariffs, announcing plans to slap an additional 34 per cent tax on all US imported goods from next Thursday.
This comes on top of the tariffs - ranging from 10 to 15 per cent - that it has already imposed on a host of US agricultural products in response to Trump´s earlier set of levies.
As further payback to Washington, Beijing - which faces a 54 per cent US import tax in the wake of “liberation day”- has also imposed export controls today on seven rare earth elements critical to the production of consumer electronics.
Cue another day of global market turmoil.
The UK’s FTSE-100 index suffered its worst one-day drop in five years, closing down 4.95 per cent.
US markets also had their worst day since the impact of the Covid pandemic in 2020, suggesting American consumers could be the greatest casualties of all of their own president’s economic policies. The tech-heavy Nasdaq fell into what is known as "bear territory" today - that is, it may close more than 20% lower than its recent peak in December.
Trump criticised Beijing’s retaliatory measures today, saying “China played it wrong, they panicked”, before insisting his policies “would never change” and reassuring Americans “this is a great time to get rich, richer than ever before”.
China has been hit hard by Trump´s liberation day announcement, not just because of the whopping 54 per cent figure Trump personally selected for the rival superpower. Additionally, Washington’s imposition of such heavy tariffs on fellow South East Asian countries including Cambodia, Vietnam and Laos, ranging from 46 to 49 per cent, has destroyed a key former route for Beijing to rejig its supply chains to get around US tariffs.
The steep tariffs imposed on this part of the world will deal a heavy blow too to key US companies that manufacture goods in the region, such as Apple and Nike.
Another reason why the trade war unleashed by Trump may prove short-sighted is that it could strengthen ties between America´s allies in South East Asia and its biggest rival. South Korea, Japan and China recently held their first economic talks in five years and agreed to speed up talks for a free trade agreement. Trump´s tariffs give them every reason to accelerate these efforts.
China and the US both have plenty to lose from a full-blown trade war, as does the rest of the world. But don’t expect either superpower to back down soon, meaning there will be more market turmoil to come.
That said, it is worth paying to attention to what happens tomorrow when Tik Tok’s Beijing-based owner ByteDance is met with a deadline to either divest the app to a US buyer or face a ban in America.
Trump has suggested Beijing could get a "little reduction in tariffs" if it helps approve the sale of Tik Tok to an American firm.
How Beijing responds to this suggestion will give us a first hint of if it is in any mood at all to compromise.
Caitlin Allen
Deputy Editor
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The new great power competition for minerals. Paul Josephson in Engelsberg Ideas.
When should a democracy stop politicians from running for office? DAT Green in Prospect.
How the UK and Europe could respond to Trump’s ‘liberation day’ tariffs. Renaud Foucart in The Conversation.
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