On Tuesday, U.S. President Donald Trump initiated the onset of a renewed trade conflict by implementing a 10% tariff on Chinese goods. In quick succession, China responded by announcing a 15% tariff on U.S. imports of coal and liquefied natural gas, along with a 10% tariff on crude oil, agricultural machinery, larger engine cars, and pickup trucks, as stated by the Ministry of Finance.
In a separate move, the State Administration for Market Regulation (SAMR) in China declared its intention to investigate Google for potential violations of antitrust laws. While the details regarding Google’s alleged misconduct were not specified, it was highlighted that Google had pulled its search engine services from China in 2010 due to censorship issues but continues to operate offices in the country focused on its advertising sector.
China has been increasingly rigorous in its antitrust actions against foreign technology firms. In 2023, a merger between Intel and Tower Semiconductor was thwarted due to a lack of timely regulatory approval from SAMR. Further, in December, China initiated a probe into Nvidia concerning its acquisition of Mellanox Technologies. Additionally, the Chinese government has labeled PVH Corp., the parent company of Calvin Klein, and biotech company Illumina as “unreliable entities,” a status that may lead to punitive measures. Last September, China announced an investigation into PVH for allegedly boycotting Xinjiang-sourced cotton.
The financial markets have been reacting to these developments. The U.S. postponed the imposition of new tariffs on China and Mexico by 30 days, contingent on military agreements with both nations to bolster their respective borders with the U.S., as mentioned by Trump. The President also indicated a potential upcoming conversation with Chinese President Xi Jinping, which would be their first since Trump assumed office.
Despite the tariffs coming into effect, Asian markets saw increases on Tuesday, although these were slightly moderated by the actions of both countries. Chinese technology firms felt a wave of investor optimism, evidenced by a 4.5% rise in the Hang Seng Tech Index. Conversely, the CSI 300 index, which lists the top 300 companies on the Shanghai and Shenzhen stock exchanges, saw a minor dip of 0.28% in early trading on Wednesday. This followed the closure of mainland Chinese markets since January 28 due to the Chinese New Year holiday.
President Trump has indicated that the introduction of the new tariffs is in response to China’s insufficient control over fentanyl exports to the U.S. Previously, both nations had collaborated on fentanyl regulation through a joint counter-narcotics initiative established in January of the prior year. The Ministry of Finance in China has accused the U.S. of breaching World Trade Organization rules, asserting that the new tariffs will not contribute to resolving the U.S.’s internal issues.
Economist Larry Hu from Macquarie projected that the new tariffs could cut China’s GDP growth by 0.4 percentage points in 2025. Hu proposed that a stimulus package worth 500 billion yuan ($70 billion) might counteract this economic impact.
It should be noted that this update includes accurate movements of the CSI 300 benchmark, correcting a previous report that mistakenly stated the reopening date of the mainland Chinese markets.
This report was initially published on Fortune.com.
