How much is too much? The growing chain of tariffs between the United States and its trade partners is expanding at an alarming rate while industries brace for the impact of escalating trade wars. Following the United States' announcement of reciprocal tariffs on what it called 'Liberation Day,' it's no surprise that other countries are starting to retaliate.
China, one of the United States' major trade partners, who is already hit by a 45 per cent tariff and now the 34 per cent reciprocal duty, has roared back with the same percentage of tax on all American imports, starting April 10, 2025, intensifying a bitter trade war between the world's two biggest economies.
This escalating conflict has been building for some time. It started when the US granted a 30-day reprieve to its North American neighbours in February but not to China. Later in March, the US imposed a 25 per cent tariff above the 20 per cent across-the-board duty. While most US trade allies faced a 25 per cent tariff on aluminium exports, China was subject to a steep 45 per cent. And finally, in April, the Trump government levied an additional 34 per cent reciprocal tariff, further worsening the situation.
In retaliation, China has adopted a tit-for-tat approach to safeguard its own rights and interests. Besides mirroring the same 34 per cent tariff to the United States, China will also control exports of seven rare earth minerals - samarium, gadolinium,terbium, dysprosium,lutetium, scandium, and yitrium. Scandium and yitrium are used in the aluminium production as micro alloys. While scandium is used to enhance strength, heat tolerance, and corrosion resistance, yitrium is applied to amplify mechanical properties and microstructure of aluminum alloys. This particular move by China appears to be a strategic one, as the country controls two-thirds of the global aluminium supply chain. While the United States seeks to boost domestic aluminium production, limited access to rare earths could hinder Donald Trump's objectives.. But that's not all if you think so. The United States is subject to 67 per cent of tariffs imposed by China.
The US and China are each other's top trading partners, with Chinese goods sales amounting to over USD 500 billion in the US, accounting for 16.4 per cent of the country's total exports. But now, with more and more tariffs in place, China's growing export market, which reached a high in 2024, will see a hit.
"The US tariffs on Chinese imports announced so far this year could fully negate the lift from the fiscal stimulus measures announced so far," said Frederic Neumann, Chief Asia Economist at HSBC.
In addition to aluminium, steel, and automobiles, which have already been subject to US tariffs, China's electronics, electrical machinery, textiles, and clothing are also facing significant tariff increases.
