China hits back after Trump’s 100% tariff threat

Beijing has told the US it will act if Donald Trump fails to back down on his threat to impose 100% tariffs on Chinese imports as investors get ready for renewed trade war turmoil.

China blames Washington for rising tensions

China’s commerce ministry accused Washington of increasing trade tensions between the two countries after Trump announced on Friday that he would impose the additional tariffs on China’s exports to the US and introduce new controls on critical software by 1 November.

Relations between Washington and Beijing had improved over the summer, when Trump agreed to drastically cut the high tariffs he imposed on China earlier this year, after weeks of negotiations between the two countries. But on Friday night, he threatened to increase them again by imposing a 100% tariff on goods from China “over and above” any tariffs that were already in place. He said this would happen on 1 November “or sooner”, suggesting that the move may happen faster if Chinese officials decide to retaliate.

Trump Threatens New Tariffs and Export Controls on China

He added that the US will also introduce export controls on “any and all critical software.”

“I never thought it would come to this but perhaps, as with all things, the time has come,” Trump wrote on his Truth Social website, claiming: “Ultimately, though potentially painful, it will be a very good thing, in the end, for the USA.

“One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration.”

Trump suggested that a planned meeting between himself and Xi Jinping in South Korea later this month may be cancelled, saying “there seems to be no reason” to meet with the Chinese president.

Trump’s threat sets the stage for another escalation in the volatile dispute with China. Only four months ago, he said that US relations with China were “excellent” after approving a tariff reduction deal.

In the spring, amid escalating trade tensions, Trump raised US tariffs on Chinese imports several times, reaching a peak of 145%. Beijing responded by raising its own tariffs on US exports to 125%.

But talks between officials, who were concerned over the impact of such excessive duties on the world economy, brought about a temporary calm. The US lowered its tariffs on Chinese imports to 30%, while Chinese tariffs on US goods dropped to 10%.

China responds to tariff threat

China’s Ministry of Commerce on Sunday said “we are not afraid of” a trade war with the United States after President Donald Trump announced that he would impose new, harsh tariffs on Chinese imports.

A spokesperson accused the U.S. of a “textbook double standard” and of abusing export controls, taking discriminatory action against China.  

The statement came after Trump’s new tariff threats and China’s decision to impose new export controls on rare earth minerals. China is the world’s largest producer of rare earths, accounting for more than 90% of the world’s processed rare earths and rare-earth magnets. The 17 elements are essential for producing everything from electric cars to plane engines.

Earlier this week, Beijing significantly expanded its export controls over rare earths, adding five new materials to the restricted list.

“Wilful threats of high tariffs are not the right way to get along with China,” a spokesperson for the commerce ministry said on Sunday. “China’s position on the trade war is consistent. We do not want it, but we are not afraid of it.”

The spokesperson said that the United States “for a long time … has been overstretching the concept of national security, abusing export control, taking discriminatory actions against China, and imposing unilateral long-arm jurisdiction measures on various products, including semiconductor equipment and chips.”

“If the United States insists on going the wrong way, China will surely take resolute measures to protect its legitimate rights and interests.”

Trump signals willingness to negotiate

On Sunday, Trump and senior US administration officials opened a door to a China trade deal as the futures market projected that the US stock market would plummet again.

“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!” Trump wrote on Truth Social.

US accuses China of “hostile” rare-earth moves

The US president shocked the financial markets on Friday when he accused China of “very hostile” moves to restrict exports of rare-earth materials needed by US industry.

China defended the controls as legitimate, saying they were not export bans and that civilian-use applications would still be approved.

The measures were introduced after Washington added a number of Chinese firms to its export control list in a crackdown on the use of foreign affiliates to circumvent export curbs on chipmaking equipment and other goods and technology.

Global markets react

The president’s latest online attack on Beijing rattled investors on Friday. Wall Street plunged sharply, with the S&P 500 falling 2.7%, suffering its worst day since April, the Dow Jones industrial average down 1.9% in New York, and the technology-focused Nasdaq Composite plunged 3.6%.

Shares in tech giant Nvidia, the world’s biggest public company, with a market value of almost $2.5 trillion – were hit particularly hard, falling almost 5%.

Other leading global markets also came under pressure. The FTSE 100 slipped 0.9% in London.

Dow futures showed a further 887-point drop ahead of the stock markets’ open on Monday, after the index fell 879 points (1.9%) on Friday amid renewed trade war fears after Trump threatened 100% tariffs and Beijing said it would restrict rare earth exports.

Bitcoin, which initially tumbled 8% after Trump’s post on Truth Social, recovered by 4% on Sunday after China refrained from immediate retaliation.

JD Vance urges Beijing to “choose the path of reason”

Senator JD Vance told Beijing to “choose the path of reason” in the latest escalating trade dispute between the two biggest economies in the world, which has unsettled global markets.

Vance told Fox News’ Sunday Morning Futures that the situation would be a delicate dance, largely depending on how China responded. He said that if China responded aggressively, the president of the United States has a lot more cards than the People’s Republic of China. If, however, they acted reasonably then the US would, too.

Analysts assess Trump’s tariff threat

Michael Brown, a senior research strategist at Pepperstone, said that Trump’s tariff threat was bad news for financial markets as investors had “by and large moved on from the trade and tariff story.”

 He said that the main thing everyone wanted to know was whether Trump’s tariff threat was credible or whether it was another example of the ‘escalate to de-escalate’ strategy that the administration had used often earlier in the year. He explained that this strategy involved threatening outlandish tariff figures to focus minds, extract concessions from the other party, and ultimately reach an agreement faster than might otherwise have been possible.

Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.