New Trade Tensions Between the US and China: Biden’s New Tariffs and China’s Expected Response

President Joe Biden recently announced extensive new tariffs on Chinese imports, leaving many wondering how China will react. In an exclusive interview with Yahoo Finance, Biden indicated that retaliation from China is likely. “I don’t think it’ll lead to any international conflict or anything like that, but I think they’ll probably try to figure out how they can raise tariffs, maybe on products that are unrelated,” Biden remarked.

Biden believes the forthcoming trade conflict will be manageable, asserting that China’s aim is to flood markets with cheap, government-subsidized goods to drive competitors out of business and then dominate the market. The new tariffs announced on Tuesday will affect a wide range of incoming Chinese goods, including electric vehicles, semiconductors, medical products, and more.

Expected Retaliation from China

Experts suggest that China’s response will look significantly different. Ashley Craig, an international trade lawyer based in Washington, D.C., noted, “The simple fact is that the Chinese are just not buying much from the United States.” As a result, any retaliation from China might have a limited impact on the US.

However, similar to the Chinese retaliation during the Trump era, certain prominent American sectors could feel the pinch. For instance, machinery manufacturers such as Caterpillar could be affected. Additionally, farmers looking to export their crops and other goods like chemicals might also face challenges.

Trump’s Response and China’s Official Statements

Former President Donald Trump responded to Biden’s announcement by urging for 100% tariffs on all Chinese vehicles, claiming, “China is eating our lunch right now.” When asked about Trump’s comments, Biden retorted that Trump “has been feeding them for a long time.”

China’s Foreign Ministry has repeatedly responded to Biden’s tariffs but has provided few details. On Tuesday, Foreign Ministry spokesperson Wang Wenbin reiterated China’s opposition to the tariffs and vowed to “take all measures necessary to defend our legitimate rights and interests.” Whether this will spark a new trade war remains to be seen, but it is likely to target areas China has focused on in recent years.

The Economic Impact on Key Sectors

The US-China Business Council reports that China was the United States’ third-largest goods export market in 2022, supporting more than 1 million jobs. The top five export categories were oilseeds and grains, semiconductors and components, oil and gas, pharmaceuticals, and basic chemicals.

Council president Craig Allen warned that the new tariff package “invites retaliation from China, which combined could further disadvantage US companies selling goods and services in China’s market compared to their foreign competitors.”

Treasury Secretary Janet Yellen expressed concern over possible Chinese retaliation but emphasized the targeted nature of the tariffs, affecting only about 4% of US imports from China. Jared Bernstein, head of Biden’s Council of Economic Advisers, noted that while retaliation is always a possibility, it cannot be the guiding principle for the president’s actions.

Potential Scenarios and Political Implications

Early estimates from experts suggest a variety of possible outcomes. Tobin Marcus, head of US policy and politics at Wolfe Research, predicted that Beijing will aim for proportional retaliation, limiting the fallout for the US. Simon Evenett, a professor at the University of St. Gallen, suggested that the 2024 political landscape could influence China’s response, potentially targeting battleground states.

Data from Biden’s trade team shows the interconnectedness between China and key states in the upcoming election. For example, Pennsylvania, a crucial swing state, exported $3 billion worth of goods to China last year, including chemicals, machinery, and food products.

Agricultural Sector in the Crosshairs

The agricultural sector could be hit hardest, as it was during the Trump-era tariffs. The American Soybean Association noted that soy growers are “still bruised” from the previous trade conflict, which “essentially halted soy exports to the country overnight.” Craig emphasized that history is a good indicator, suggesting that agricultural products like soybeans and beef could again be targeted, assuming China can find alternative sources as they did before.

In conclusion, as the US and China brace for potential new trade tensions, the impact will likely be felt across various sectors, with political and economic implications both domestically and globally.