China has just hit US coal and liquefied natural gas with a 15% tariff. American consumers could end up paying $40 billion more because of this decision. The Chinese government didn’t stop there. They slapped another 10% tax on US crude oil, farming equipment, and large-engine vehicles, which kicks in February 10.
The trade war between these economic giants keeps reshaping world trade patterns. US imports from China have dropped 21% since their peak in 2018, when they reached $538.5 billion. These new measures could push the actual tariff rate on US goods entering China up by almost 2 points. China remains a vital trading partner and handles 13.5% of everything the US brings in. Yet this latest round of tariffs shows the growing tension between the world’s biggest trading partners. Let’s get into how these tariffs will affect businesses right now and which industries face the toughest road ahead.
China Unveils Multi-Pronged Response to US Tariffs
China revealed a complete response to US trade measures by announcing targeted tariffs on American exports. The Chinese Finance Ministry set a 15% tariff on coal and liquefied natural gas products. They also imposed a 10% tariff on crude oil, agricultural machinery, and large-engine cars from the United States.
The Commerce Ministry took immediate action to control exports of minerals that are crucial for high-tech manufacturing. These controls target:
- Tungsten
- Tellurium
- Bismuth
- Molybdenum
- Indium
China lodged a formal complaint with the World Trade Organization. They claimed that America’s “unilateral tariff increase seriously violates WTO rules”. The new tariffs will take effect on February 10, showing careful timing of these measures.
China’s control over critical minerals gives them significant economic power. The country’s refined output accounts for almost 90% of global production for many of these metals. These materials play a vital role in defense technology, clean energy systems, and high-tech manufacturing. America hasn’t produced refined bismuth since 1997 and stopped tungsten mining in 2015.
Chinese officials stated these measures aim to “safeguard national security”. Beijing’s actions show a calculated strategy to impose economic pressure while keeping room for future negotiations.
How Will Markets React to Escalating Trade War?
The global financial markets showed sharp reactions to growing trade tensions between the US and China(link_1). The S&P 500 futures dropped by 0.2% instead of continuing their original rally from deals with Mexico and Canada. European markets showed weakness too, as Germany’s DAX stayed flat and Britain’s FTSE 100 fell 0.3%.
Currency markets saw major swings. The Chinese yuan reached a four-month low and traded at 7.2675 against the US dollar. The Australian dollar dropped 0.35% to USD 0.62 because of its close ties to China’s economy. The euro weakened 0.15% to USD 1.03.
Asian markets took the hardest hit:
- Japan’s Nikkei 225 dropped more than 2.5%
- Hong Kong’s Hang Seng moved lower
- Taiwan Semiconductor Manufacturing Company fell over 5%
The automotive sector faced heavy pressure, especially when European manufacturers saw big losses. Volkswagen, BMW, and Daimler Truck fell between 5% and 6%. US automakers felt the pressure too, with Tesla and General Motors dropping more than 4%.
The bond market showed rising investor fears as China’s 10-year treasury yield fell below 2%(link_2) – its lowest point in 22 years. Analysts now expect US GDP could slow by 0.8–1.0 percentage points in 2025, while China might see a smaller 0.4-point decline.
Which Industries Face the Biggest Impact?
The trade war’s escalation brings major changes to several key industries. Chip makers like NVIDIA, Micron, and Intel are at the vanguard of this disruption. These companies have become more vulnerable because much of their revenue comes from China.
American farmers face tough challenges in their soybean exports. They have lost about USD 24 billion in Chinese market access. The manufacturing sector bears heavy costs. Studies show they paid nearly USD 46 billion in tariff-related expenses.
The energy sector faces massive pressure that reshapes global trade flows. Here’s what changed:
- Chinese crude oil imports dropped 52% to 230,540 barrels daily
- LNG shipments grew two-fold to 4.16 million tons, valued at USD 2.41 billion
- Coal exports grew by almost one-third to USD 1.84 billion
China’s export controls on critical minerals make the technology industry vulnerable. Chinese companies produce 80% of global gallium and refine 90% of the world’s graphite. These restrictions pose risks to U.S. electronics manufacturing, military equipment production, and clean energy development.
Supply chain issues and higher component costs have disrupted the automotive sector. Moody’s Analytics reports show the trade war’s toll on the U.S. economy: 300,000 lost jobs and roughly 0.3% of real GDP.
Conclusion on Trade War
Chinese tariffs represent a most important turning point in US-China trade relations. A 15% tariff on US coal and natural gas, combined with restrictions on critical minerals, shows China’s calculated approach to economic pressure. Market indices dropped sharply while currencies fluctuated and bond yields reached historic lows.
American industries now face tough challenges. China’s exposure creates problems for the semiconductor sector and farmers have lost $24 billion in market access. Manufacturing companies bear $46 billion in tariff costs while the technology industry can’t access everything in minerals.
Economic damage from this trade war can’t be ignored. The US has already lost 300,000 jobs and seen a 0.3% GDP reduction. Analysts believe US economic growth might slow by up to 1 percentage point in 2025. This situation creates a complex future for both economic powerhouses that must weigh their next steps in this growing confrontation.
