• China rejects President Trump’s tariff threat, calling it a “mistake on top of a mistake,” and vows strong countermeasures as U.S.-China trade tensions escalate.
• The ongoing trade conflict includes retaliatory tariffs, rising to 65% on Chinese goods, and potential retaliations like halting U.S. agricultural purchases or restricting rare earth exports.
• Economic impacts are mounting, with the yuan weakening and both nations bracing for prolonged negotiations amidst escalating pressures.

China’s Ministry of Commerce has firmly rejected President Donald Trump’s latest threat to increase tariffs, calling it a “mistake on top of a mistake” and vowing strong countermeasures. This latest escalation in the U.S.-China trade conflict underscores growing tensions between the two nations. Trump announced plans to impose an additional 50% tariff on Chinese imports if Beijing does not withdraw its recent 34% tariff on U.S. goods.

In a translated statement, China emphasized it “will fight to the end” if the U.S. continues along this path. As both nations dig in their heels, the risk of a prolonged trade standoff looms larger than ever.

Background on the Trade Dispute

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Last week, China’s Ministry of Finance introduced a 34% retaliatory tariff on all U.S. goods, effective April 10, in response to Trump’s new levies imposed earlier this year. These tariffs follow an escalating pattern, with earlier rounds ranging from 10% to 15% targeting U.S. agricultural and energy products. Analysts suggest the expanded tariffs indicate waning Chinese optimism for a diplomatic resolution.

According to Morgan Stanley, the U.S.’s additional tariffs this year have raised the average tariff rate on Chinese goods to 65%, potentially denting China’s economic growth by 1.5 to 2 percentage points in 2023.

Implications for the U.S. and China

Tianchen Xu, a senior economist at the Economist Intelligence Unit, noted, “China already faces more than 60% in tariffs; whether it increases further, the impact is marginal.” Xu added that Beijing is bracing for an all-out trade confrontation.

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China is likely to retaliate further, potentially halting purchases of U.S. agricultural goods, matching U.S. tariffs, or expanding restrictions on rare earth exports and dual-use items. Adding pressure, China has tightened export controls on strategic materials and blacklisted several U.S. firms under its “unreliable entities list.”

Currency and Economic Outlook

The trade dispute is also affecting currency markets. The People’s Bank of China set the onshore yuan midpoint rate at 7.2038 per dollar, the weakest level since September 2023. Onshore yuan fell 0.33% to 7.3323 per dollar, while offshore yuan remained stable.

Gabriel Wildau of Teneo highlighted that both nations are testing each other’s limits but predicted negotiations will eventually resume as economic pressures mount. “Escalation is likely in the short term, but both sides will feel the pinch,” Xu concluded.

What’s Next? Share Your Thoughts

As the U.S.-China trade conflict intensifies, the long-term impact remains uncertain. Policymakers, business leaders, and industry stakeholders are urged to consider the broader economic implications.

For more insights and analysis, visit The Dupree Report. Follow The Dupree Report on WhatsApp via WhatsApp Channel.

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