Trade tensions between the world’s two largest economies are set to escalate further as China implements retaliatory tariffs on select US agricultural products starting Monday.
This move comes in response to President Donald Trump’s latest tariff hike on Chinese imports, marking another chapter in the intensifying trade war between the two nations.
Since his return to office in January, President Trump has aggressively imposed tariffs on major US trading partners, including China, Canada, and Mexico, citing their failure to curb illegal immigration and the influx of deadly fentanyl into the United States.
In early February, he imposed a blanket 10% tariff on all Chinese goods, which was further increased to 20% last week.
China responded swiftly, with its finance ministry accusing Washington of “undermining” the multilateral trading system and announcing a new set of countermeasures.
The retaliatory tariffs will see additional duties of 10% and 15% imposed on various US agricultural products, particularly targeting sectors critical to Trump’s voter base.
Impact on US Agriculture
Effective Monday, American exports of chicken, wheat, corn, and cotton will face a 15% tariff, while soybeans, sorghum, pork, beef, aquatic products, fruit, vegetables, and dairy products will be subjected to a 10% tariff.
- Analysts suggest that Beijing’s strategic selection of agricultural goods aims to exert political pressure on Trump while leaving room for future negotiations.
- The escalation of tariffs adds to the mounting challenges for US farmers, who have already endured volatile commodity prices and disruptions in export markets.
With China being one of the largest buyers of US agricultural goods, the impact could be substantial, leading to reduced exports and financial strain on American producers.
China’s Economic Challenges Mount
For China, the trade war intensifies at a time when its economy faces significant headwinds. Policymakers are grappling with sluggish consumer spending, a prolonged debt crisis in the real estate sector, and persistently high youth unemployment.
- These challenges have put pressure on the government to stabilize economic growth amid rising uncertainty.
- China’s exports, which reached record highs last year, may no longer provide the same economic cushion as trade tensions with the US persist.
- The latest trade data reflects a slowdown, with exports growing by only 2.3% year-on-year in the first two months of 2025—far below the 10.7% recorded in December 2024 and missing market expectations.
“As exports face downside risk with trade war looming, the fiscal policy needs to become more proactive,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
Beijing’s Economic Strategy Amid Trade War
The latest trade data was released as top Chinese officials convened for the country’s largest annual political gathering, the “Two Sessions,” where Premier Li Qiang outlined the government’s economic strategy for the year ahead.
In his address, Li acknowledged the “increasingly complex and severe external environment” and reaffirmed the government’s ambitious growth target of around 5% for 2025—similar to the previous year.
Despite the official optimism, many economists remain skeptical about China’s ability to meet this target given the economic hurdles it faces.
The property sector’s prolonged slump, weak domestic demand, and external pressures from the ongoing trade war make sustained growth a challenging feat.
