China prepares trade retaliation after US tariff hike—Who’s first in the line of fire?

Beijing has issued a strong warning against the United States' decision to double tariffs on Chinese imports from 10 per cent to 20 per cent, vowing to take retaliatory action. The Ministry of Commerce (MOFCOM) accused Washington of using fentanyl-related concerns as a pretext for economic aggression.

"China is strongly dissatisfied with this and firmly opposes it, and will take countermeasures to resolutely safeguard its own rights and interests," a MOFCOM spokesperson stated on Tuesday.

China has long rejected US claims that it facilitates the supply of fentanyl-related chemicals, arguing instead that it enforces some of the world's strictest drug control laws. MOFCOM urged the US to "immediately withdraw" what it described as "unreasonable and groundless" tariff measures.

China Readies Countermeasures

Reports from the Global Times suggest that Beijing is preparing both tariff and non-tariff retaliatory measures. US agricultural and food products are expected to face new trade barriers. An anonymous source quoted by the newspaper warned, "If the US insists on imposing unilateral tariffs and formally announces relevant measures, China will definitely implement strong and effective countermeasures."

The Chinese Embassy in Washington also criticised the US move, calling it "unilateralism and trade protectionism." The embassy urged the US to focus on "reducing domestic drug demand and strengthening law enforcement" rather than blaming external factors.

Tariffs to Take Effect from March 4

The tariff hike, announced by former President Donald Trump, is scheduled to take effect on March 4. The plan also includes steep tariffs on imports from Canada and Mexico, with a 25 per cent levy on most goods from these countries. Canadian energy, however, will be taxed at 10 per cent.

Trump has framed the tariffs as a way to pressure neighbouring countries to curb drug trafficking, particularly fentanyl. However, multiple Chinese ministries have dismissed the justification as baseless and politically motivated.

China Rejects US Fentanyl Claims

MOFCOM has accused the US of "shifting the blame" for its domestic drug crisis onto China. The ministry stated, "Targeting other nations will not address the US' internal drug issues but will instead harm businesses and consumers in the US while disrupting global supply chains."

Lin Jian, spokesperson for China's Foreign Ministry, also denounced the tariffs. "The US is using fentanyl as a tool to pressure, coerce, and threaten China. Such tactics will backfire and undermine bilateral cooperation on drug control," he warned.

Economic Fallout of Trump's Tariff Strategy

The scale of the new tariffs is among the most extensive of Trump’s presidency, affecting an estimated $1.5 trillion in annual imports, according to Bloomberg.

Economic analysts have warned of serious repercussions for the US. Higher tariffs could stoke inflation, disrupt North American supply chains, and prompt legal battles under the United States-Mexico-Canada Agreement (USMCA), a trade pact renegotiated during Trump's first term.

The US economy is already showing signs of strain. Stock markets and cryptocurrencies have dipped, consumer confidence has weakened, and inflation remains high. A fresh round of trade tensions could further shake financial markets.

Canada and China Respond

Canada has wasted no time in announcing countermeasures. The country has imposed immediate tariffs on C$30 billion ($20.75 billion) worth of US goods, with an additional C$125 billion ($86.4 billion) in tariffs expected in the coming weeks.

China has also signalled its readiness to respond. While details of its retaliation remain unclear, experts predict that US agricultural and food exports will be hit with fresh tariffs and regulatory restrictions.

Mexico, on the other hand, has yet to announce any countermeasures, adopting a wait-and-see approach as tensions escalate.