China has announced retaliatory tariffs on select American imports and an antitrust investigation into Google, just as new tariffs imposed by U.S. President Donald Trump on Chinese goods took effect.

This latest escalation in trade tensions raises concerns over the potential for a prolonged economic standoff between the two global superpowers.

The Latest Trade Dispute

Trump’s sweeping tariff policy, which also includes levies on Canadian and Mexican imports, was temporarily paused for 30 days for those two countries as they work to address border security concerns. Meanwhile, Trump plans to speak with Chinese President Xi Jinping in the coming days, signaling possible negotiations.

This isn’t the first time the U.S. and China have engaged in a trade war. A similar tit-for-tat conflict erupted in 2018 when Trump raised tariffs on Chinese goods, and Beijing responded in kind. However, analysts suggest that China is better prepared this time, using a broader range of measures beyond tariffs while being cautious not to destabilize its own economy.

China’s Response

China’s newly announced tariffs include a 15% levy on coal and liquefied natural gas (LNG), along with a 10% tariff on crude oil, agricultural machinery, and large-engine cars from the U.S. These tariffs are set to take effect next Monday.

“The U.S.’s unilateral tariff increase seriously violates the rules of the World Trade Organization,” stated the State Council Tariff Commission. “It is not only unhelpful in solving its own problems but also damages normal economic and trade cooperation between China and the U.S.”

Economic Implications

Despite the aggressive stance, the actual impact on U.S. exports may be limited. The U.S., a major exporter of LNG, ships only a small fraction to China. Additionally, fewer than 110,000 American-made vehicles were imported into China last year. However, analysts believe that U.S. automakers such as General Motors and Ford, which have been expanding their vehicle offerings in China, may feel the pressure.

The Risk of Escalation

Stephen Dover, chief market strategist at Franklin Templeton Institute, warns that this could be the beginning of another prolonged trade war. “A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower GDP growth everywhere, higher U.S. inflation, a stronger dollar, and upside pressure on U.S. interest rates,” he said.

For now, the world watches closely as tensions rise, with hopes that diplomatic talks between Trump and Xi may prevent further economic fallout.

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