US-China trade war escalates

The newly inaugurated US president Donald Trump fired another salvo in the latest chapter of the US-China trade war, calling for a 10 % additional tariff on Chinese products effective February 4. Again on March 1, Trump ordered China’s import tariffs to go up by additional 10 %, effective March 4, while declaring 25 % import tariffs would also go into effect for Canada and Mexico (only to see further postponements on March 6). Notably, the first round of punitive tariffs imposed on China in 2018 and 2019 during Trump’s first term remained in place throughout Joe Biden’s presidency. The average tariff imposed on Chinese imports in that first round rose from 3 % to around 20 %. If the latest set of tariffs are applied to all imports without waivers, the average tariff level would climb to around 40 %. In addition, president Trump said in February that he would eliminate the $800 duty-free exemption for small packages from China. This exemption has been key to the explosive growth of online sellers and increased popularity of Chinese online vendors. Officials have managed to have the effective date postponed until the government and customs officials can prepare for the shift.

After the announcement of this round’s first tariff increases, China responded with retaliatory tariffs on specific American imports (BOFIT Weekly 6/2025). Again in March, China announced targeted counter-tariffs, in both rounds applying mostly commodities that can be acquired also from other countries. China’s finance ministry announced it was imposing additional import tariffs of 10–15% on numerous US agricultural products, effective March 10. In addition, China’s commerce ministry added several American firms to its unreliable entity list (which forbids trade and investment) and export control list (which prohibits exports of dual-use items without authorisation). The commerce ministry also said that it had submitted a revised complaint against the US tariffs to WTO.

China’s newest round of tariffs include a 15 % hike for US wheat, cotton, corn, and chicken, as well as a 10 % hike on soybeans, sorghum, vegetables, fruits, dairy products, pork, beef, and seafood. The items subject to the new tariffs represent roughly 15 % of US’s goods exports to China last year (valued at around $21 billion). Soybeans, by far the most important of these, account for 9 % of total exports to China. Half of all US soybean exports last year went to China. In addition, 86 % of sorghum, 24 % of cotton and 20 % of fish and seafood exports went to China. China imports most of its soybeans from Brazil. US supplies about a quarter of China’s soybean imports.