China Increases Tariffs on US Goods to 84% Amid Rising Trade Tensions

The Finance Ministry has just made an announcement, remember, there were 34% tariffs on all US goods coming into China? That’s now been increased to 84%. An 84% hit on all US goods entering China. Obviously, that’s a clear blow to every US Company wanting to sell into this huge market. No doubt this is going to send more shockwaves through the markets, especially in the US. But, like I said, this especially hurts any American company wanting to sell into this market.

There may well be other measures. The other thing mentioned in that statement is that Beijing is taking the Trump administration to the WTO. We kind of knew that already—the World Trade Organization—but there may be more measures to come. That’s just been flashed right now. So, there’s no backing down from the Chinese government. They said there would be resolute countermeasures if Donald Trump followed through on his promise to increase US tariffs on Chinese goods to a minimum of 104%. And now we’re seeing the beginnings of that.

So, what is Donald Trump going to do in the face of yet another increase from China? Where does it stop? The Chinese government, for example, has been saying over the last couple of days that, from its point of view, the Trump administration has shown no inclination whatsoever to enter into negotiations.

Today, through its proxies—state media and reporters on social media platforms—it’s been ridiculing the fact that other countries are going to Washington with what they describe as a "begging bowl," asking, “Oh please, Donald Trump, can you take these tariffs off us?” They’re saying this is playing right into Trump’s hands. That actually, he wants to pick off countries one by one.

The contrast being made here is that Beijing says it supports multilateral trade efforts—rules that apply to everyone. And there is some sympathy for that, especially in Southeast Asian countries and developing economies like Laos, Cambodia, and Vietnam. They've been hit very hard by tariffs from the US.

Funnily enough, in a meeting today, Xi Jinping said that China has to increase its trade with—guess where?—its neighboring countries, those very same countries. So, you can see they’re trying to make something good out of the trade chaos coming from this onslaught from the Trump administration.

Yeah, I mean that news literally came in as we were discussing. We're just going to hold on to that thought for a second and show you the DAX—the German index—because you can see on screen, as that news came in, a steep drop in the German markets. And we’re hearing from Reuters that US stock index futures have turned sharply lower after China announced those additional tariff measures on US goods. So, this is clearly a fast-moving story.

Just to remind our viewers of the scale of this—how important is US-China trade? So much of what people use in both countries comes from the other.

Yeah, I mean, it's absolutely enormous. And you can imagine why such an announcement would cause such huge drop-offs in stocks, even in other countries. You’ve got the global superpowers at each other’s throats, with enormous volumes of trade flowing between them. Remember, both are building things using components from each other’s countries. So, if you’re putting a tariff on one side, you’re also hurting your own manufacturing base.

All these American companies—Trump says, “No worries, people are going to buy American.” But those cars and products are still using components, possibly coming out of China. They’ll now have to pay more for those. The car producers, for instance, will be hit directly.

This is why the ripples are being felt all over the world. The shock of yet another announcement from China—responding yet again to more tariffs from Trump—is causing real angst. Economists and analysts are calling it disastrous for the global economy.

Now, we’re still getting more information from China’s Commerce Ministry. Reporter has been talking to us and may not have seen this, but the latest update says the Commerce Ministry has added six US entities to the "unreliable entity" list. It also says twelve US entities have been added to the export control list. I appreciate this is new, but is there anything to read into that?

Well, this is similar to what happened last time. When the 34% tariff was applied to all US goods, there was also a group of companies added to this "unreliable trading" list. Typically, that’s someone involved in trade related to Taiwan, Hong Kong, or anything that has upset Beijing. So they use that as an excuse to put these companies on those lists, effectively blocking them from trading in China. The people involved may also be sanctioned by Beijing if they attempt to trade with China.

China is trying to balance the trade equation here. There's more Chinese trade going into the US than vice versa, so Beijing can’t exactly match the overall tariff impact. Instead, they’ll cherry-pick sectors that might really hurt the US, especially those connected to Trump’s political base. That’s why, last time, they struck at agriculture. And it might happen again.

There have been hints of this on social media through state-affiliated reporters, suggesting further measures could include blocking agricultural products. So far, unless I’ve missed something, that hasn’t been officially announced tonight, but it could still happen.

China still has options if Trump escalates again and applies tariffs beyond the 104% minimum on all Chinese goods. Beijing has more tools at its disposal.

One key difference with China, compared to other countries, is that it’s a large, resilient economy with a massive domestic market. The government here has repeatedly stated that it can ride this out, and that’s far more realistic than it would be for smaller economies. I mentioned earlier those Southeast Asian countries, which are likely to be badly hit by these tariffs. For them, it's a struggle.

That makes it harder for Washington to "bully" Beijing, given the strength of China’s economy. You can imagine other countries looking at how Beijing is standing up to the Trump administration and considering whether that might even earn them political support from certain quarters.

In the long run, that stance could even lead to increased trade with other countries, making up for losses due to reduced sales to the US. And that could provide some buffer for Chinese companies as they shift focus toward new partners.