China responded cautiously on Tuesday to U.S. President-elect Donald Trump's announcement of a 10% tariff on nearly all Chinese imports, framing the move as retaliation for fentanyl trafficking into the United States. The measure, revealed on Trump's social media platform on Monday, adds new tension to already fraught economic ties between the world's two largest economies.
Trump criticized China's anti-narcotics efforts, alleging insufficient action to curb the flow of fentanyl. "Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before." he said. Trump declared the tariffs would remain in place until the issue is resolved.
Separately, Trump proposed a 25% tariff on imports from Mexico and Canada, targeting illegal immigration and drug smuggling. The tariffs would take effect on January 20, his first day in office.
China's embassy in Washington rejected the tariff measure, emphasizing its extensive counternarcotics efforts. Spokesperson Liu Pengyu described U.S.-China trade as mutually beneficial, adding, "No one wins a trade war or a tariff war."
Liu highlighted resumed communication between U.S. and Chinese authorities after the recent San Francisco Summit. He noted that "China has notified the U.S. of the progress made in U.S.-related law enforcement operations against narcotics and responded to U.S. requests for verifying case clues. These actions demonstrate that the notion of China knowingly allowing fentanyl precursors to flow into the United States runs counter to facts and reality."
While Beijing has not announced specific retaliatory steps, officials hinted at possible actions, including higher tariffs on U.S. agricultural goods, increased regulatory scrutiny on American firms in China, and efforts to diversify supply chains by strengthening trade partnerships with other countries.
Analysts say Beijing could leverage closer ties with the European Union, where talks are underway on trade issues, including Chinese electric vehicle imports. The EU is considering setting minimum prices for Chinese EVs to counter alleged unfair subsidies.
The additional tariff follows years of heightened trade tensions. The U.S. already imposes duties on over 10,000 Chinese goods under Section 301 of the Trade Act. Trump's previous tariffs, maintained by the Biden administration, have targeted sectors such as electronics and automotive components.
From January to September 2024, U.S. imports from China totaled $322 billion, according to Commerce Department data, making China the second-largest supplier to the U.S. after Mexico. Imports from Mexico, China, and Canada account for 40% of total U.S. imports.
Trump's plan to impose a 25% tariff on Mexico and Canada could breach the United States-Mexico-Canada Agreement (USMCA), which eliminated tariffs between the three countries. Experts warn this may lead to legal challenges and strained diplomatic ties.
Further tariff increases risk disrupting global supply chains, raising costs for U.S. consumers, and escalating trade disputes. Analysts note that additional tariffs could prompt Beijing to strengthen alliances with other trading partners to reduce reliance on the U.S. market.
