Tensions between the United States and China have reached a new high after US President Donald Trump threatened to add a 50% tariff on Chinese goods. In reply, China said the US is using “blackmail” and promised to fight back “to the end”.

Trump gave China 24 hours to cancel the 34% tariff it had announced last week on US products. This Chinese move was in response to earlier US tariffs of the same amount. If both countries continue raising tariffs, the total new tax on Chinese goods entering the US could rise to 104% this year. This growing trade fight has already caused major losses in the global market.

On Tuesday, China’s commerce ministry said, “The US threat to escalate tariffs against China is a mistake on top of a mistake, which once again exposes the US's blackmailing nature.” The ministry also added, “If the US insists on having its way, China will fight to the end.”

At the same time, China said it is still open to talks. The ministry said it wanted “dialogue” with the US and warned that “there were no winners in a trade war”.

China shows strength, but markets shake

Beijing’s strong response comes from its larger plan to stand firm against what it calls “unilateral bullying” by the US. Over the weekend, the Chinese government told the world that it is ready for a long trade war.

A powerful message was published in the People’s Daily, the official newspaper of the Chinese Communist Party. It said, “US tariffs will have an impact (on China), but ‘the sky won’t fall.’” The article added, “Since the US initiated the (first) trade war in 2017 – no matter how the US fights or presses – we have continued to develop and progress, demonstrating resilience – ‘the more pressure we get, the stronger we become.’”

Even with this show of strength, the markets are reacting badly. On Monday, Hong Kong’s Hang Seng Index declined by 13.2% – its worst fall since the Asian financial crisis. It made a small recovery when trading opened on Tuesday, but the situation remains tense.

Trump, on Tuesday, confirmed that he would move forward with the new 50% tariff on Wednesday if China does not pull back its latest tariffs. With the earlier hikes, the average US tariff on Chinese products will now reach 76%.

Experts are also unsure whether these new tariffs will help the US. Xu Tianchen, a senior economist at the Economist Intelligence Unit, told Reuters, “Since China already faces a tariff rate in excess of 60 per cent, it doesn’t matter if it goes up by 50 per cent or 500 per cent.” He added, “What China can do is stop US farming purchases, match US tariffs and expand its export controls across the periodic table of chemical elements.”

 

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