The US-China trade war has escalated again! Beijing's tough response to the latest US tariff increases has drawn global attention. Experts warn that a comprehensive decoupling of the two major economies may accelerate, with market volatility intensifying accordingly.
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ToggleBeijing's Countermeasures Escalate: Tariffs, Export Controls, and Enterprise List Simultaneously
The Chinese Ministry of Foreign Affairs issued a statement last Saturday (April 5th), clearly stating that it will "continue to take resolute measures to safeguard national sovereignty, security, and development interests." This statement not only had a tough tone but also notably omitted any mention of negotiations with the US, signaling a shift in China's trade stance.
The day before, Beijing announced a 34% tariff on all US imported goods, completely reciprocating President Trump's new sanctions. These new tariffs are an escalation of the 10-15% tariffs imposed in February and March, which primarily targeted US agricultural and energy imports.
In addition to tariffs, China simultaneously implemented a series of retaliatory measures, including restricting rare earth exports, banning exports of "dual-use" technological products to several US military and aerospace companies, and placing 11 US enterprises on an "unreliable entity list" that will face more operational restrictions within China.
Economists: China Determined to 'Fight to the End' with the US
Independent economist Xie Guozhong pointed out: "China's imposition of tariffs at the same rate demonstrates its determination to confront the US directly. Beijing's actions clearly show its willingness to go the full distance, regardless of the outcome."
Some analyses suggest that Beijing's tough response indicates that future retaliatory actions will be more intense, potentially triggering a vicious cycle of tariff retaliation and possibly leading to an "unmanaged decoupling" of US-China trade relations before 2025.
US May Make Another Move, Negotiation Space Nearly Frozen
Although some Trump administration officials believe this is an opportunity to accelerate decoupling from China, China's countermeasures might also prompt the US to escalate further, creating a situation of mutual "pressing the accelerator".
Morgan Stanley's Chief China Economist Xing Ziqiang noted that if the latest US tariffs are fully implemented, the weighted average tariff rate on Chinese goods could reach 65%. He estimates this could lead to a 1.5 to 2 percentage point decline in China's GDP growth this year, primarily due to export obstacles and increased domestic deflationary pressure.
Negotiation Breakdown? China Suspected of Abandoning Short-term Agreement
Analysts generally believe that Beijing's actions reflect its lack of expectation for reaching a short-term agreement with the US. Previously, Trump had made several friendly statements about being willing to meet with Xi Jinping, but Beijing's retaliatory measures have clearly deviated from a "restrained" position.
Teneo's Managing Director Gabriel Wildau noted: "Beijing's actions suggest that China's leadership may no longer believe a short-term agreement with the US is possible."
Trump countered on Truth Social, accusing China of being "panicked and making wrong decisions," and hinting that tariffs might be lowered if China approves TikTok's sale to US investors. However, analysts believe Beijing may be unwilling to accept such arrangements, fearing they would appear "forced to compromise by the US".
Official Media Releases Signal: China Prepares for a Prolonged War
Although appearing tough externally, China has not completely closed the door to negotiations. Analysts from the Eurasian Group point out: "Beijing's strategy might be to gain negotiation leverage through proportional or even disproportionate countermeasures."
The official CCP media outlet People's Daily also stated in a commentary that China still has ample policy tools, and will stimulate domestic demand with "extraordinary measures", being ready to lower policy interest rates and increase fiscal expenditure at any time to counter the economic impact of the trade war.
Market Reaction Intense: Stocks, Bonds, and Exchange Rates Simultaneously Plummet, Confidence Severely Impacted
Affected by the escalating trade war risks, global financial markets experienced severe fluctuations. The Hong Kong Hang Seng China Enterprises Index plummeted over 13% on Monday, marking the worst single-day drop since the 2008 financial crisis.
Meanwhile, China's 10-year government bond yield sharply dropped 9 basis points to 1.634%, and the offshore RMB depreciated 0.35% against the US dollar, trading at 7.3212.
Where Will China-US Relations Head?
This tariff contest between China and the US appears to be more than just economic measures, but a comprehensive competition involving national dignity, technological sovereignty, and geopolitics. In the short term, neither side seems to have room for compromise, and the stability of global markets and industrial chains will depend on the trajectory of this "prolonged war".
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